Inheritance tax revenue hits £0.5bn in April, up £10m from same period a year – London Business News
Inheritance tax revenue jumped to £0.5billion in April 2022 according to data released today by HMRC. This is 10 million pounds more than the same period last year.
Freezing inheritance thresholds until 2026, high inflation and rising house prices are causing more and more estates to be pushed above the threshold.
There is a tax-free inheritance allowance called a zero bracket that applies to everyone. Each person can pass on up to £325,000 from their estate without having to pay IHT.
Any amount over £325,000 could be subject to inheritance tax of up to 40%. The zero rate band has remained at the same level since April 2011, even though inflation has increased by 43% during this period and the average house price has increased by 66%.
Some homeowners may also be eligible for a ‘zero rate residency band’ of up to £175,000 on top of the zero rate band. However, this only applies when you pass on your principal residence to a direct descendant.
The “zero-rate residency band” was introduced in 2017 and grew every year with inflation until last year when the Chancellor announced it would be frozen until 2026.
Alex Davies, CEO and Founder of Wealth Club, said: “Inheritance tax really is the gift that keeps on giving – at least to the Treasury. With the pace of house price growth still near double digits, it’s no wonder so many households are being pushed above the IHT threshold. The average family hit by inheritance tax is now thought to face an average tax bill of £200,000.
There are perfectly legal and legitimate ways to reduce your inheritance liability with a little careful and early tax planning. Writing a will in a way that you are obligated to review and resolve any issues your estate may face, and keeping it regularly updated to reflect any change of heart or circumstances should be a priority for everyone. , married or not.
Give money early. Gifts taken from regular income, which are not deemed to affect the standard of living of the donor, are exempt from inheritance tax on day one, as are some smaller gifts. Timing is key as you can give unlimited amounts, but it usually takes seven years to be completely free of inheritance tax. Of course, once you give the money, you lose control. If you need it in an emergency, that’s not an option.
Invest in businesses eligible for Business Property Relief. These are generally exempt from inheritance tax after two years. Investing in unlisted companies can be risky, however, unlike giving money, you are in control.
Invest in an AIM ISA. ISAs are not exempt from inheritance tax. When you die, your loved ones could lose 40% of your hard-earned money. ISA AIMs are a popular way around this problem. They are more risky but after two years they could be IHT free.
The homes of unmarried couples could be subject to inheritance tax on the death of one of the partners and any tax liability would be due within six months, forcing many people to sell their homes during their bereavement. Cohabitants need to think seriously about how they approach this problem. Although marriage is not for everyone, it can offer significant tax benefits and married couples can bequeath everything to their surviving spouse without having to pay inheritance tax.
And finally, whatever you do, be sure to make a will. If you don’t, the law will decide the distribution of your estate and it will certainly not be the most tax-efficient way.