- 22nd August 2018
- Posted by: Suzy Hill
- Category: Personal Tax
Inheritance Tax reaches record levels
Inheritance tax (IHT) receipts hit a record high of £5.2bn last year, according to new statistics published by HM Revenue & Customs, and taxpayers should plan well in advance to ensure they don’t swell the government’s coffers at the expense of their loved ones.
Said Brearley & Co Tax manager, Andrew Cowe, “IHT payments rose 8 per cent year on year in 2017/18, according to new HMRC data, and since 2009 receipts have risen, on average, 10 per cent a year. Property prices have exceeded the rate of inflation, while the ‘nil-rate band’ the amount which individuals can pass on free of IHT, has been frozen at £325,000 throughout the same period”.
The strange paradox is that IHT has been labelled both “Britain’s most hated tax” and a “voluntary tax”, and in reality both of these labels are correct. So why are so many people paying, quite willingly, the one tax which is the easiest to plan for and legitimately avoid?
Andrew continues, “In my view there are a few reasons for this, the first being similar to the question as to why so many people do not make Wills. Even for those who are not concerned with ‘tempting fate’ it is easy to put off dealing with an issue which few people really want to acknowledge and confront, i.e. their own eventual demise. In addition, people can be reluctant to pay for advice the success of which can only be known after they have died. The ‘tax point’ is their death, and they simply are not going to be around to check whether the tax adviser has done what he or she has been paid to do!”
“Finally, much (but not all) IHT planning involves physically giving away wealth or assets, which no matter how wealthy one is, will always be something which few people are going to do without serious thought. When they do not know for certain how long they will live or how much capital they will need to sustain them, giving away wealth is a huge step”.
“Ultimately there is no ‘right’ or ‘wrong’ answer, only what is right for that particular individual. It is entirely understandable that some people may wish to keep hold of their assets and pay IHT, however reluctantly. However for those who do wish to do something about reducing their eventual IHT exposure and maximising what they can leave to their loved ones, we can always help with sound, individually tailored advice”.
Andrew Cowe, Tax manager, Brearley & Co