Inheritance Tax receipts on the increase

The Inheritance Tax threshold is currently at £325,000 for an individual or, potentially, £650,00 for a married couple/civil partners. The value of a net estate above this threshold is taxed at 40%. There are also tax concessions relevant to a main residence, that passes to direct descendants, that can, potentially, provide a further £350,000 for a married couple/civil partners before the 40 % rate applies.

Inheritance Tax receipts in the UK mounted to approximately £7.5 billion in 2023/24, compared with £7.09 billion in the previous financial year, which was a peak at the time.

The receipts have increased and may likely continue this way. Are there measures you can take to minimise Inheritance Tax?

Gifts can be made prior to death, either outright or into a Trust, with the aim of reducing your estate for tax purposes. If there is a business in your estate, a Will can be prepared to leave the business into a Trust and the non-business assets to a surviving spouse or civil partner to remove Inheritance Tax, at least when the first spouse passes away.

In addition, there are financial products that may assist when planning to mitigate Inheritance Tax. Term assurance policy can be activated to cover tax payable following a gift made within seven years prior to death or, more generally, to cover the tax liability on an estate. There are other investment products that use Business Property Relief, to reduce the value of an investment to nil, that can be acquired and owned for two years prior to death. These types of investments can be especially helpful to ‘convert’ assets liable to Inheritance Tax, such as bank account values, into exempt assets through a purchase of a business property investment. Careful independent financial advice should always be considered before purchasing an insurance policy, or a business property investment, to reduce Inheritance Tax on an estate. Our estate planning services are often provided alongside the advice of an appropriate independent financial adviser.

We would be pleased to speak with you about Inheritance Tax and Will planning.

Please contact Rob Gore, Melissa Hamilton or Kyla Galloway-Wood in the Private Client Team on 01606 74301.