Why you need to review your estate as Inheritance Tax hits new high
Figures recently released by HM Revenue & Customs show that inheritance tax (IHT) receipts between April and July 2022 were a notable £2.4 billion, with £600 million collected in July alone.
It is a development that could have massive implications for families all over the country, but especially here in the South East, which has some of the highest property values in the UK.
To put the figures into context, the figure of £2.4 billion is £300 million higher than in the same period in 2021, and overall receipts for the year leading up to July 2022 were 14% higher than this time last year.
The reason for this is down to the incredibly high inflation and soaring house prices - these factors are causing the value of estates to go into orbit.
Adding further fuel to this already difficult situation is the Inheritance Tax nil rate band of £325,000 (the “tax-free” allowance) which has been frozen since 2009 and is not set to be reviewed until April 2026.
It is therefore no surprise that the Office for Budget Responsibility has estimated that annual receipts – which were £6.1 billion in 2021/22, up from £2.38 billion in 2009/10 – will rise to a striking £8.3 billion by 2026.
So, what does it mean for people living in Staines, Spelthorne, and surrounding areas?
It means that this not just a tax that is affecting what most would consider to be the very wealthy, but a tax affecting the wealth of middle-class families who are unprepared if someone dies, and Inheritance Tax comes into effect.
Inheritance tax comes into effect on individuals who have over £325,000 in their estate. A look at any estate agent’s website for this region will demonstrate that there are now many people who will have above this figure in equity, even if they have relatively modest lifestyles.
The frozen thresholds mean that HMRC has already doubled the tax taken from IHT over the past decade. This surge will partly be due to the ongoing increases in house prices, as residential property, as you would expect, makes up the lion’s share of most estates.
So, as things stand the taxman is getting 40 per cent of hundreds of thousands of pounds in many estates.
What should you do?
It has never been so vital to get professional legal advice for estate planning as many families will lose a lot of money in inheritance tax, which could be passed on to loved ones.
We at Dale & Newbery can give much-needed advice in this area. This is really a necessity giving peace of mind to many.
With inflation set to rise further in these challenging times, it has never been so vital to stay ahead of the game by preparing for such eventualities, so call us today to find out more.