Owen Jones says that inheritance should be taxed
Make the most of your money by signing up to our newsletter for FREE now
We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info
Inheritance tax is charged at 40 percent where it is due and as such, can take a big chunk out of a family’s estate. The cost of this was highlighted recently as HMRC released statistics on how much IHT contributes to the Government’s coffers.
On August 20, HMRC released statistics which showed the Government collected £2.1billion from IHT in April to July 2021.
This was £500million more than what was taken during the same period a year earlier.
Nick Ritchie, a Director of Wealth Planning at RBC Wealth Management, commented: “The £0.5billion year-on-year increase in IHT receipts comes as no surprise.
“Rising house prices and investment markets have increased the volume and value of estates caught in the IHT net, and with the Chancellor freezing the nil rate band until 2026, this trend looks set to continue.
Rishi Sunak may target IHT in the coming months (Image: GETTY)
“At the same time however, many individuals have brought forward their plans to gift to the next generation amid mortality fears fuelled by the pandemic, and concerns over how the Chancellor might target larger estates in the future.”
Mr Ritchie went on to explain while it’s unlikely the IHT rate itself will be raised, other areas of the tax may be targeted over the coming months to cover coronavirus-related costs.
“One thing is for certain, at just 0.6 percent of the 19/20 tax take and with an IHT rate of 40 percent, already among the highest of the OECD countries, targeting IHT won’t be the silver bullet to recouping the swelling deficit,” he said.
“Increasing the rate of IHT seems unlikely, but enhancing receipts by removing or reducing reliefs, targeting lifetime gifts or removing the generous capital gain exemption on death, could have a part to play.
Universal Credit: MPs urge Rishi Sunak to extend payment uplift [INSIGHT]
Rishi Sunak must tackle the pensions gap ‘once & for all’ [WARNING]
MPs push for property overhaul on council tax & stamp duty [EXPERT]
“Individuals might wish to consider implementing their wealth transfer strategy sooner amid current, tried and tested rules, rather than risk being caught out by stricter rules in the future.”
According to Money Helper, trying to reduce how much IHT is paid on an estate is a complicated area to manage.
However, in short, this can be done by:
- Leaving a legacy to charity
- Putting your assets into a trust for your heirs
- Leaving your estate to your spouse or civil partner
- Paying into a pension instead of a savings account
- Regularly giving away up to £3,000 a year in gifts.
Property often makes up a large part of an estate (Image: EXPRESS)
The organisation also expanded on how gift, reliefs and exemptions work in practice: “Some gifts and property are exempt from Inheritance Tax, such as some wedding gifts and charitable donations.
“Relief might also be available on certain types of property, such as farms and business assets.
“If the person who died gave a gift in the seven years before they died, it’s counted as part of the estate, and likely to incur IHT.
“How much tax is due depends on the value of the gift, when it was given and to whom.”
Where IHT is due, it must be paid by the end of the sixth month after the person’s death.
If it is not paid by then, HMRC will begin adding interest to the debt.
Generally, if an estate is likely to incur IHT, it is a “good idea” to pay some of the tax within the first six months of death, even if the estate has not been fully valued yet.
Full details on IHT rules can be found on the Government’s website and impartial guidance can be sought from the likes of Citizens Advice.