In the 2023/24 tax year, the government is expected to collect a record-breaking £7.5 billion from Inheritance Tax (IHT), marking a 25% increase over three years. This total, from April 2023 to March 2024, is £0.4 billion higher than the previous all-time high of £7.1 billion in 2022/23, representing a 5.6% rise.
According to Wealth Club‘s analysis of HMRC data, Britons paid a record £6 billion in IHT during the 2021/22 financial year. They predict the number of estates subject to IHT will rise from 27,800 to 30,300 this year, with the average bill increasing from £215,000 to £248,000. They warn that rising property prices and frozen IHT thresholds are leading to more people paying the tax, and the number of families facing an IHT bill may be higher than reported.
Annually, over £100 billion is transferred through inheritance and gifts in the UK, with the value of bequests in England projected to double by 2040. The Institute for Fiscal Studies (IFS) predicts that growing wealth among older generations could push IHT revenues to £15 billion by 2032/33.
Why is Inheritance Tax planning more vital than ever?
Given the record-breaking figures and projections, IHT tax planning is more vital than ever. Effective IHT planning involves various strategies to mitigate the impact of this tax. These strategies can include making use of available exemptions and reliefs, setting up trusts and making lifetime gifts. By implementing such measures, individuals can significantly reduce the taxable value of their estates, ensuring that a greater portion of their wealth is preserved for their loved ones rather than being paid in taxes.
In summary, as IHT receipts continue to rise, and more estates become liable, the necessity for strategic and proactive IHT tax planning becomes ever more apparent. By taking timely and effective actions, individuals can protect their family’s financial future and ensure that their hard-earned wealth is passed on according to their wishes.
Contact us today for expert advice on Inheritance Tax.
Author: Louise Berry, Tax Manager
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Date published: 05 August 2024