Rising Inheritance Tax Take – Time to Review Your Estate Planning

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New data from HMRC show that in 2022/23 inheritance tax (IHT) payments hit a new high. 

The IHT nil rate band was set at £325,000 in April 2009 and has been frozen ever since. This year’s Budget extended that freeze to April 2028. For the first year of the nil rate band in 2009/10, IHT receipts amounted to around £2.4 billion. Figures recently released for 2022/23 show receipts at just over £7 billion in the fourteenth year of the freeze.

 

 

 

IHT has become a tax which now potentially affects many more people, particularly after a surviving spouse or civil partner dies. On the first death there is normally no tax to pay, so it is often the children or grandchildren who experience first-hand the full impact of IHT. 

 

Mitigating the freeze

If you want to limit the Treasury’s share of your estate, the sooner you start planning, the better. Unfortunately, one of the simplest strategies – making substantial lifetime gifts – is often not a practical option. 

However, there are other routes to lowering the IHT bill on your estate, including:

  • Make the most of pensions 

Although the primary role of pension arrangements is to provide income in retirement, legislative changes have turned pensions into a valuable estate planning tool. 

 

  • Use the normal expenditure exemption 

If you make gifts that are regular, out of normal income and that do not reduce your standard of living, then they are free of IHT. 

 

  • Make a will and, if you already have one, keep it up to date 

The right will can not only help save IHT, but also means that you choose your beneficiaries rather than the arbitrary rules of intestacy. 

 

  • Skip a generation 

By passing money directly to your grandchildren, you could reduce the IHT on your children’s estate. 

 

IHT planning is best considered as part of your overall financial planning, rather than in isolation. Professional advice is essential to navigate the complexities of the legislation. 

 

Review Your Financial Plan

To arrange an appointment, you can contact us via your usual MHA adviser, or directly on 01604 621 421 or enquiries@mhacaves.co.uk

 

Important Information/Risk Warnings

The Financial Conduct Authority does not regulate tax advice. Tax treatment varies according to individual circumstances and is subject to change. 

The Financial Conduct Authority does not regulate will writing and some forms of estate planning.

 

MHA Caves Wealth is authorised and regulated by the Financial Conduct Authority (FCA), Financial Services Register number 143715. 

This is a marketing communication, for general information only, and is not intended to be individual investment advice, a recommendation, tax, or legal advice. The views expressed in this article are those of MHA Caves Wealth or its staff and should not be considered as advice or a recommendation to buy, sell or hold a particular investment or product. In particular, the information provided will not address your personal circumstances, objectives, and attitude towards risk. Therefore, you are recommended to seek professional regulated advice before taking any action. 

Key Risks: Capital at risk. Past performance is not a guide to future performance. The value of an investment and the income generated from it can go down as well as up, and is not guaranteed, therefore you may not get back the amount originally invested.

Investment markets and conditions can change rapidly. Investments should always be considered long term. 

This Information represents our understanding of current law and HM Revenue & Customs practice as at June 2023. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change. 

Tax and Estate Planning Services (including Trusts) are not regulated by the Financial Conduct Authority.