The importance of careful estate planning in respect of Inheritance Tax (IHT), to establish an approach that protects your wealth and assets, is being emphasised more than ever by rising IHT receipts, inflation, and property prices.
Figures from HM Revenue & Customs (HMRC) show that IHT receipts in March 2022 reached record levels.
This is largely the result of asset values creeping up, as aforementioned; the decision taken by the Government to freeze the Nil-Rate Band (NRB) at £325,000 until 2026, and the Residence Nil-Rate Band (RNRB) having peaked at £175,000.
All this means that, currently, the first £500,000 of a person’s estate is free of IHT (£1 million when combined with a spouse/civil partner’s allowance).
The problem with this is that more and more estates are exceeding the exempt amount, and so finding themselves subject to IHT.
In addition, the RNRB begins to taper in instances where an estate exceeds £2 million.
Essentially, thousands more families could be facing a liability where previously they would not, whilst others will not necessarily be surprised by a liability arising but, instead, by the amount due.
IHT planning – what are the possibilities?
Where IHT is concerned, it is never too soon to consider the possibilities that may enable you to mitigate your liability, and to ensure that those you leave behind receive what you intend.
When we speak to an individual about an IHT strategy that works in their best interests and those of their loved ones, the following are just some of the questions we ask:
- Do you have a valid Will? Without one the rules of intestacy will apply.
- Can you utilise the RNRB, or a spouse/civil partner exemption?
- Have you made the most of your annual allowance, in respect of making gifts out of your estate?
- Have you considered making a charitable donation upon your death?
- Have you made, or do you plan to make, any potentially exempt transfers (PET)?
- Do you have investments that attract Business Relief (BR)?
- Could you benefit from creating a trust?
- Have you considered how you are utilising any pension funds?
- Have you completed a Death Benefit Nomination form, in respect of your pensions?
How can George Hay help?
We share your concerns about paying IHT and we appreciate that, with the cost of living rising, you may also have concerns about ensuring that any strategies you adopt do not impact upon your quality of life now, or at a later date.
With our years of experience, knowledge of your circumstances and careful tax planning, these concerns can be accounted for, and we can ensure that you arrive at a solution that gives you peace of mind.
If you would like to speak to one of our team about Inheritance Tax and Estate planning, contact one of our offices in Cambridgeshire, Bedfordshire, or Hertfordshire, today.