Jenny Pierce, Managing Partner at Wards Solicitors and Regional Director of SFE (Solicitors for the Elderly) has warned that inheritance tax (IHT) could be a ticking time bomb for many families, following HMRC’s announcement last week that IHT collections for April to July 2021 were £500million higher than the same period a year earlier.
Jenny has urged people to get up to speed on inheritance tax planning to ensure families aren’t hit with unexpected bills.
“Every individual has a tax-free allowance for inheritance tax known as their Nil Rate Band which currently stands at £325,000. On anything above this, the standard 40% IHT applies. If you’re leaving property to a family member, the Main Residence Nil Rate Band may also apply which is an additional tax-free allowance of £175,000” she explains.
“In the Spring Budget the Chancellor froze the Main Residence Nil-Rate Band. Usually, it would increase with inflation. This means as property prices rise the tax-free allowance won’t go as far as it used to. More families will be affected by IHT and to a higher degree than before”.
A recent survey by SFE, the body representing solicitors that specialise in legal support for older people, shows more than half (55%) of its members fear the impact of this will catch families out.
The key, Jenny says, is to be aware of IHT and start planning early.
“It can sound like a daunting task but people who plan ahead will have more options.
“In general, a good place to start is to consider who you’d like to benefit from your estate when you die and then think through the implications.
“Gifts to charity are completely exempt from IHT and if your estate is liable for IHT and you leave 10% or more of it to charity, then a reduced IHT rate of 36% may be applicable to the rest of your estate.
“You may want to gift money and property to your beneficiaries before you die. But gifts made while you’re alive could still be liable to IHT, depending on how much they were and when they were given.”
“Seeking specialist advice is always a good idea as everyone’s circumstances will vary.”