What is the importance of lifetime tax planning?
ASSOCIATE solicitor Louise Nelson, from Thames Valley law firm Blandy & Blandy’s Wills, Probate, Tax & Trusts team, highlights HM Revenue & Customs’ (HMRC) recently released Inheritance Tax (IHT) figures for the past year and offers a reminder to individuals and families of the importance of lifetime tax planning.
HMRC has recently released figures showing that they collected a record £5.5 billion from Inheritance Tax receipts between April 2021 and February 2022, an increase of £0.7 billion on the previous year.
The previous record of
£5.36 billion was set in 2019.
Whilst property prices and the value of other assets continue to rise, the nil rate band (the value above which IHT becomes payable) has remained unchanged at £325,000 since 2009, and will do so until at least 2026.
Despite the introduction of the residence nil rate band from April 2017, which is available to some estates provided certain conditions are met, more estates are being brought within the scope of Inheritance Tax.
Individuals and their families may also be impacted by Capital Gains Tax (CGT), a
tax you pay on the profit made when selling (or ‘disposing of’) something (an ‘asset’) that has increased in value during your ownership, such as a second property.
The Office for Budget Responsibility (OBR) has suggested that £125 billion will be raised from IHT and CGT receipts in the next five years.
There are a number of tax-free allowances which may be available to an estate, allowing you to pass on a greater share of your estate to loved ones upon your death.
If an estate’s value exceeds the relevant allowances, IHT is payable on the balance of the estate at the rate of 40%.
There is no tax at all, whatever the value of the estate, on property going to a widow or widower or to a charity.
The value of this exempt property is deducted from the value of the whole estate before the tax calculation is done.
In this way, gifts to husbands, wives and charities can take an estate out of the tax bracket.
Blandy & Blandy, which has offices in Reading’s Blagrave Street, says its specialist Wills, Probate, Tax & Trusts team can provide advice on Wills and estate planning, including in relation to trusts and lifetime tax planning.
It has also published two blog articles that some people will find helpful.
They are entitled When
I Die, Will Inheritance Tax
Have to Be Paid on My Estate?, and What is the Purpose of Inheritance Tax (IHT)?
■ For further information, log on to: www.blandy.co.uk, email: law@blandy.co.uk or call 0118 951 6800.