New research has indicated that inheritance tax paid by British families has reached an annual total of £5 billion.
From the final data collection before the new threshold was introduced in April, the figures revealed the highest figure ever recorded – largely due to growing house prices in the South. Paired with the higher stamp duty deterring would-be downsizers, this has led to a greater number of people having to pay inheritance tax (IHT).
In the 12-month period to May 2017, HMRC collected £5.1 billion in IHT receipts. Compared to the previous year when £4.7 billion was collected, this indicated a growth of 9% over the same amount of time.
The threshold of £325,000 has remained the same since 2010 despite the rapid increase in house prices over the last decade. This has caused the number of people to be affected by IHT to rise, and according to separate forecasts from the Office for Budget Responsibility, over the past seven years, the number of estates where IHT is due has grown from around 10,000 to over 40,000.
One of the key considerations for people as they get older is whether or not to ‘down-size’. Though often an unpleasant thought for many, the simple truth is that if they don’t downsize elderly people 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 however various reasons which prevent people downsizing, a big one is the substantial cost of moving, including stamp duty, in addition to the substantial effort involved – often at a time when they are less physically able. On top of that is often the lack of suitable housing for retired people in the area they wish to live.
In April 2017, the New Residence Nil-Rate Band (RNRB) was introduced, which increased the current IHT threshold to £425,000 for individuals who are passing on their main residence to ‘direct descendants’, or the corresponding cash equivalent if they have downsized or sold their property. This RNRB will grow by a further £25,000 each year, rising to £175,000 by 2021. For couples, therefore, this will amount to a combined allowance of £1 million when passing on property wealth.
Heir Tight Wills helps clients understand and minimise the implications of inheritance tax, and put in place robust provisions and valid documents – to protect their loved ones and their assets – both during their lifetime and after their death. For a FREE Consultation to discuss writing or updating your Will & further estate planning provisions, contact Rachael Rodgers on 0845 519 7585, or CONTACT US via email.