Abolition of inheritance tax is just a dream, say savers

Abolition of inheritance tax is just a dream, say savers: planning must remain a priority households are warned

Inheritance tax planning is likely to remain a priority for many households, despite a recent call from a government minister to scrap the tax.

Law firm Kingsley Napley said furor over the government’s mini-budget last month means the abolition of inheritance tax is no more than a political pipe dream.

Earlier this month, Treasury Minister Andrew Griffith called on the government to be “politically brave” and scrap the tax altogether.

James Ward, head of private clients at Kingsley Napley, said a move to abolish Inheritance Tax (IHT) “would surely be as unpopular as the 45p income tax fiasco”.

As a result, he says, “planning to mitigate future IHT liabilities makes a lot of sense for many households.” Inheritance tax is currently charged at 40% on the value of estates over £325,000. But if everything is left to a spouse, civil partner or charity, it is not taken.

Planning ahead: the abolition of inheritance tax is no longer just a political pipe dream

There is also an additional allowance for those who give the family home to their children and grandchildren.

A range of measures, Ward says, can be taken to mitigate IHT — most involve donating money. For example, someone can make small donations of up to £250 per tax year to as many people as they wish.

Analysis of the latest IHT data from Revenue & Customs indicates that the London and South East areas pay the most tax. This mainly reflects real estate prices.

For the tax year ending April 2020, Kingsley Napley says the London Boroughs of Kensington and Chelsea, Barnet, Camden and Westminster generated the highest amount of IHT.

In the last fiscal year, IHT raised £6.1 billion in revenue, compared to £5.2 billion in the fiscal year ending April 2020.

But the annual take could fall in the event of a correction in house prices in the coming months.

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