With the latest data showing Inheritance Tax (IHT) receipts rising and set to reach record levels this year, the need to formulate an effective plan to minimise death duties is becoming increasingly important for anyone who wants to maximise the amount they pass on to beneficiaries.

IHT receipts up…

In late July, HM Revenue & Customs published their annual IHT statistics which showed the amount collected via this tax is on an upward trajectory. In total, £5.4bn flowed into government coffers through IHT receipts during 2020/21, a 4% increase compared to the previous financial year.

…and set to reach record levels

Furthermore, analysis by the Office for Budget Responsibility (OBR) suggests a continuation of this upward trend. According to the OBR’s latest forecast, IHT receipts are projected to hit £6.3bn by 2023/24, 17% more than was collected in 2020/21.

Frozen tax thresholds

The surge in house prices over the past year is a key reason behind the rise, while the decision to freeze IHT thresholds at the last Budget is another contributing factor. In March 2021, the Chancellor announced that both the ‘nil-rate band’ of £325,000 and the ‘residence nil-rate band’ of £175,000 would remain at their existing levels until April 2026.

Early planning is key

While it is possible to minimise or eliminate any tax due on an estate through forward planning, the key is undoubtedly to create a plan at the earliest opportunity. A number of exemptions and reliefs are available for people seeking to mitigate the impact of IHT on their estate, ranging from simple lifetime gifts to more complex trust arrangements, but the options become more limited the longer you leave it. Estate planning is also a specialist area, so seeking professional input is essential.

It is important to take professional advice before making any decision relating to your personal finances. Information within this page is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK.

Equity release will reduce the value of your estate and can affect your eligibility for means tested benefits.

Tax, Estate and Inheritance Tax planning are not regulated by the Financial Conduct Authority

The value of pensions and investments can fall as well as rise. You may get back less than you invested.

CA Financial Services Ltd are an Independent Financial Adviser based in Sevenoaks, Kent. From our Sevenoaks offices, we offer IFA services throughout Tonbridge, Tunbridge Wells, Dartford, Orpington and across into Sussex and Surrey. Please call us on 01732 617 950 to book a free initial appointment.

CA Financial Services offer financial advice, pensions, investments, ISAs, Equity Release and Inheritance Tax Planning for the whole family. We have 14 years’ experience as Financial Advisers based from Sevenoaks and are truly independent, allowing us to give our customers the best financial advice possible.

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