Rising house prices and increases in other assets have seen HM Revenue and Customs tent to launch more investigations to ensure tax payers are paying correct amount of Inheritance Tax (IHT).
Despite recent statistics showing revenue raised by IHT on the increase, however the tax is too complicated from the residence nil rate band, taper relief and complexity of seven year gifting rules, which make whole IHT difficult to understand for may tax payers.
Inheritance Tax is currently paid by around 3.4% of UK estates and raised around £4.7 bn in 2015/16 and increase of 22% compared to 2014/15 according to ONS.
Confusion about the operation of IHT is growing, over two third of those liable not knowing threshold for standard nil rate band of £325,000 according to a survey by Canada Life.
Tax rates for Inheritance tax are:
| 2018/19 | 2019/20 | 2020/21 | ||
| Rates for estates | 40% | 40% | 40% | |
| Reduced rate (leaving 10% Or more to charity) |
36% | 36% | 36% | |
| Reduced rate (leaving 10% Or more to charity) |
20% | 20% | 20% | |
| Nil rate band limit | £325,000 | £325,000 | £325,000 | |
| Residence nil rate band | £125,000 | £125,00 | £125,00 |
We at FFA believe that unless people learn about Inheritance taxes and actively plan the future of their assets, the government is in line for a large and often unnecessary windfall.