British families have paid a record £5bn+ in inheritance tax (IHT) since 2016.
IHT paid by British families topped £5bn in 2016 and has continued to rise each year since. Roy Jenkins (Chancellor of the Exchequer from 1967-1970) was quoted as saying that this is a voluntary tax meaning if you don’t plan to remove or mitigate if from your estate, you volunteer to pay it when you die.
A record number of middle-class families are being dragged into the tax as a result of soaring house prices and stamp duty discouraging elderly people from downsizing, experts said.
Families with recently deceased relatives have narrowly missed out on new, higher limits which will eventually let them inherit homes worth £1m tax-free.
Despite house prices rocketing over the past ten years the inheritance tax threshold has remained the same since 2010, meaning more estates each year are hit by the tax.
Basically, if people don’t plan as they get older, and perhaps downsize, they may pay more IHT as more of their money will be tied up in their property, leaving them with less to give away.
There are various reasons why people are not downsizing, a big one is the huge cost of moving, including stamp duty and also the lack of suitable housing for retired people.
At present estates worth up to £325,000 can be bequeathed without paying IHT, with a rate of 40% payable above the threshold.
But this changed in April 2017 when the Government began phasing in an additional tax-free allowance which will allow HOMEOWNERS to bequeath an extra £175,000 in property wealth by 2021.
This means a new allowance for property owners of £500,000 – or £1m for couples. However, it is only available if you leave your home to your children, and this should be instructed via your will. Are you aware of this important step to qualify?
A substantial amount of wealth is now being taken by the government through inheritance tax as many people are not aware that it is payable nor how to remove or mitigate it.
What upsets people is that this is wealth that is being taxed twice. Income tax is paid on earnings and capital gains tax (CGT) paid on the growth of assets. To then pay a tax when you die?
But the current mood means some people are worried about being vilified if they try to reduce their tax bill. Increasingly it is being seen as an ‘unpatriotic’ thing to do.
Do you feel unpatriotic by mitigating or removing Inheritance Tax from your estate?
Of course, there are many of us that also feel that we have paid taxes once or twice already (income tax and stamp duty) so why do it again when we die?
BTW – Inheritance Tax is not only a charge on your UK assets – if you are still classed as a UK Domicile (UK born with UK Domicile parents, regardless of where you live) then your global assets are assessed when you die!
There are many ways to plan that is acceptable by HMRC and will not make you feel that you are “cheating” the UK Government. Certain pension and private trusts allow you to remain a beneficiary of the contents BUT pass onto your loved ones IHT and CGT free. You have gift allowances, and as long as you live 7 years after you give away, you are permitted to give over the allowance amount. For non-resident UK Domicile, there are trust structures that keep your off-shore assets away from UK tax burdens.
https://www.gov.uk/inheritance-tax describes how IHT works and what affect it has on your estate – you just need to know what it all means to plan effectively.