Record IHT receipts for the 8th year running
According to recently issued Government statistics, Inheritance Tax (IHT) receipts hit a record high of £5.2bn in the 2017/18 tax year. This is a year-on-year increase of 8% (£400m) on the £4.8bn total for 2016/17 and continues an eight year trend of steadily increasing IHT receipts.
This growth in IHT receipts can easily be attributed to the combination of the IHT Nil Rate Band (NRB) being fixed at £325k since April 2009 and house prices and other asset values continuing to grow. Although many commentators focus on house price increases in London and the South East, many parts of North and West Yorkshire have also seen significant house price increases. By freezing the NRB since from 2009 until 2020, the Government has created a “stealth tax”, with more estates being exposed to the IHT charge than ever before.
This increase comes despite the introduction of a new allowance, the Residence Nil Rate Band, that allows couples to pass on a family home worth up to £850k tax-free (which increases to £1m by 2020), for qualifying estates. But the complexities associated with this new relief mean that apparently only 1 in 6 estates have taken advantage of it.
Official Government statistics show that London and the South East have the highest number of estates subject to IHT (with just over half of all IHT estates concentrated in these regions). The lowest contributing regions include the North East, North West and Yorkshire and the Humber, which has been attributed to a combination of lower house prices and decreased population density. It could also be that Yorkshire folk are simply more protective of their money!
Some interesting points from the recent Government report confirm that, unsurprisingly, the most used IHT relief was the spousal relief – where assets pass free of IHT on first death to the surviving partner (with IHT then due on second death). Second to this was gifts to charities (which themselves are free of IHT and can help to reduce the overall IHT tax rate from 40% to 36%), with relief for business and agricultural property some way behind.
At Garbutt + Elliott we can offer a complimentary IHT Review Report to help you understand what IHT is and how it applies, as well as looking at your current exposure and what options you may wish to consider in order to reduce that exposure.
Many of our solutions to reduce IHT liabilities involve acting sooner rather than later, to ensure that any plan to reduce IHT is both practical and achievable. There is always a careful balance to be struck between transferring assets out of your estate to reduce your IHT exposure and retaining sufficient assets to give you the required income or capital levels you need both now and in later life.
If you are concerned about your IHT exposure and would like to explore your options please contact us at firstname.lastname@example.org.