Latest estimates from HMRC are that IHT receipts will hit £5.6 billion in 2021/22 rising to £6.3 billion pounds in 2023/24.
The rate of IHT is normally 40 per cent on the value of an estate above a threshold of £325,000. This threshold is frozen until 2025-26. Any unused threshold may be transferred to a surviving spouse or civil partner, increasing their combined threshold to up to £650,000. There is an additional transferrable main residence nil rate band of £175,000 available when a home is left to children or other direct descendants.
The rate of IHT is reduced to 36 per cent if 10 per cent or more of the net value of the estate above the threshold is left to charity.
Saving money in ISAs may keep tax on income out of the taxman’s clutches – but they still form part of the estate for IHT purposes.
There are legitimate ways of saving or reducing IHT or providing funds to pay the potential IHT. Many are of the view that “what the kids get is more than I got” but others take the view “that it is better if funds can be protected from any tax”. If the latter is your stance, or you would like to know more, including an estimate of the potential IHT situation contact us now.
