Tax experts are reminding families and individuals not to neglect the importance of Inheritance Tax (IHT) planning, despite changes to the way it is taxed.
According to the latest data from HM Revenue & Customs (HMRC), the Treasury collected approximately £5.3 billion in IHT last year – up 13 per cent on the amount collected in 2016.
News of the rise comes just months after the residence nil rate band (RNRB) – an additional tax-free IHT allowance available to individuals and families who wish to pass property to their direct lineal descendants in their Wills – was increased from £100,000 to £125,000.
Peter McMahon, Tax Partner at Grunberg & Co said: “Individuals in England and Wales will normally incur IHT at a rate of 40 per cent on all estates valued at above £325,000. But by taking advantage of the RNRB, individuals can effectively increase this tax-free threshold to £450,000 if they intend to pass on property to children or grandchildren in their Wills,” Justin said.
“The new changes to the RNRB are even better news for married couples and those who are in a civil partnership.
“This is because such individuals can combine their allowances – meaning that couples can now effectively pass on £900,000 worth of property to their children completely tax-free, just as long as they seek appropriate advice first to make sure the correct provisions have been made. Incredibly this will rise again over the next few years until a couple could potentially pass on up to £1 million.”
However, he warned that with London house prices remaining so high, many local homeowners may not feel the full benefit of the change and should still seek help to plan their estates to minimise IHT.
“It will come as no surprise to many that taxpayers in the capital are some of the largest contributors to IHT, especially due to the significant increase in property value over the last decade,” said Peter.
“While the rules for IHT may at first appear straightforward, there are a lot of complexities which could lead to a significant tax bill for beneficiaries, so it is essential that people plan ahead to ensure they are able to pass on the maximum amount of wealth to the next generation.”
As one of only a handful of accountancy firms in London to offer probate services, Grunberg & Co is in the ideal position to handle large and complex estates, including those with complex trust arrangements.
“Those who are concerned about liabilities from their estate should act swiftly, as there are a number of time restraints on gift giving and other reliefs, which can a have a significant impact on taxes due after death,” added Peter.