When a freeze is a tax hike in disguise… – Inheritance tax
Anthony Collins Lawyers
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Inheritance tax revenue increased by 13% for the 2021/21 tax year, with increases continuing to be seen for April and May 2022.
The increase in Inheritance Tax (IHT) revenue by HM Revenue and Customs is a direct result of freezing the nil bracket (the value of an estate which is exempt from Inheritance Tax) since 2009 – and therefore not adjusting for inflation – and being particularly far behind rising property prices.
The zero-rate bracket (NRB) is not expected to be increased until at least the 2025-26 tax year, by which time the Office for Budget Responsibility has estimated that estate tax revenues could increase by more than a third to reach more than £8.3 billion. Indeed, freezing the zero fare band means that more people have fallen – and will continue to fall – having to pay the IHT. The NRB freeze is a tax hike by any other name, clearly illustrated both by the rate of tax increase taken by HMRC and the forecast of continued increases in tax liability over the next few years.
It is essential to ensure that those affected by rising property values and a stagnant NRB understand their position and the options available to them – there are valid legal steps that can be taken to minimize the IHT that a person pays out of his or her estate. Through well-planned lifetime giving, preservation, and the use of all available exemptions and indemnities, IHT liabilities can be rightfully reduced.
Be sure to consider your IHT position and/or that of your clients and take early specialist advice to plan for the future and appropriately mitigate tax liability. If you would like to explore your tax situation and how you can mitigate your liability, please contact me – my colleagues and I would be happy to help.
Originally published June 24, 2022
The content of this article is intended to provide a general guide on the subject. Specialist advice should be sought regarding your particular situation.
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