Why caution over complacency is key when it comes to IHT
As we await the Budget announcement on the November 17th, it’s been suggested that there will be yet another freeze on the inheritance tax allowance, extending the current freeze for a further two years until April 2028.
A recent survey from The Private Office (TPO) revealed that more than 30% of people believed that the inheritance tax (IHT) rate of 40% was unlikely to rise as a way to compensate for the post-pandemic and cost of living crisis. And whilst more than half of people (52%) think inheritance planning is more important than it was pre-pandemic, with a third of us believing that inheritance tax won’t increase, are we being complacent?
Although there is little suggestion at this point that the rate at which inheritance tax is charged is due to rise, the raid on bereaved families is already taking place by the back door in the form of the freeze on the allowance. With this continued ‘stealth tax’ looking set to be extended, more families will be pushed over the current tax-free threshold. Given that inheritance tax is a voluntary tax, with ways you can minimise and even mitigate against it, we mustn't let complacency cost us our families inheritance.
Complacency can’t be allowed to creep in, especially since over 40% of those surveyed have an estate of over £1million.
Despite this apparent complacency, the good news is more people feel it’s now more important to plan ahead to minimise potential inheritance tax bills and pass on more wealth to loved ones, than it was pre-pandemic. In the last two years, we have seen a 68% increase in the number of people believing inheritance tax planning is now ‘very’ important, going from 31% to 52%. And interestingly, the number of people who feel more comfortable talking about the ‘taboo’ of inheritance tax has risen from 13% to 24%.
Clare McCarthy at The Private Office continues “With a predicted £293billion of wealth expected to be passed down to future generations, the ‘taboo’ of discussing inheritance tax planning must be broken to prevent us all paying more tax and passing less to loved ones, unnecessarily.*
Calculate the inheritance tax bill on your estate
Inheritance tax is a tax paid on wealth passed down to your loved ones on your death. At a hefty 40% tax charge it’s not something you want to ignore.
Calculating your possible inheritance tax liability is relatively easy with our new calculator. In just a few clicks , you’ll be able to see if your or your loved one’s’ estate may be liable to pay tax and importantly what that tax bill may be. We can help you plan how to minimise or even avoid inheritance tax through strategies such as gifting, utilising the 7-year rule in inheritance tax and through the use of trusts. With professional, independent financial advice inheritance tax doesn’t have to be the taboo subject. Families can easily plan their wealth transfer across generations, safe in the knowledge that they’re keeping more of the family wealth where it belongs.
Try our Inheritance Tax Calculator to see how the changes could affect the tax bill to your estate.
We can help you plan how to minimise or even avoid inheritance tax through strategies such as gifting, utilising the 7-year rule in inheritance tax and through the use of trusts. With professional, independent financial advice inheritance tax doesn’t have to be the taboo subject. Families can easily plan their wealth transfer across generations, safe in the knowledge that they’re keeping more of the family wealth where it belongs. Contact us now for a free initial consultation to see how we can help.
* M&G Family Wealth Unlocked Report 2022
Survey conducted July 2022 to 1,878 respondents
Note: The Financial Conduct Authority does not regulate taxation advice, estate planning or inheritance tax planning. The information contained within this article is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change.