Avoid inheritance tax by filling out a simple form
The number of people captured by IHT will increase by one-fifth for fiscal year 2020-21, following an increase in the number of deaths during the pandemic, according to estimates by the Office for Budget Responsibility, the official forecaster.
Soaring house prices and a five-year freeze on tax breaks announced in the spring budget will lead to an increase in the number of people paying death tax – around 22,000 at last count – from 60% to 36,000 d ‘by 2026. The government’s IHT transport is expected to hit a record Â£ 6 billion by the end of the current fiscal year.
The allowance of Â£ 325,000 will remain frozen until 2026, as will the ‘family home’ allowance of Â£ 175,000 which offers additional protection to those who transfer their primary residence to a direct descendant. The main allowance of Â£ 325,000 has not increased since 2009, despite years of inflation and rampant house price growth.
Married couples can combine their allowances, meaning they can in theory pass on up to Â£ 1million tax-free. The âspouseâ exemption also allows all assets that pass from one spouse or civil partner to another after death to benefit from an allowance of 100pc.
This means that policyholders who have not put their coverage plans in trust can protect their IHT payments by ensuring that their spouse is the beneficiary.
A government spokesperson insisted Britain has one of the “fairest and most competitive tax systems in the world”. They said he would respond to OTS proposals on exemption from insurance policies in due course, adding that he kept all taxes under constant review.