Spurred by factors such as the rising value of property, more people are being dragged into the inheritance tax net, with the number of families hit by inheritance tax set to double in the next five years from one in twenty estates to almost one in every ten.
Despite this, inheritance tax exemptions and reliefs were worth £15 billion in the last tax year, demonstrating that there are many inheritance tax planning options available.
Further inheritance tax changes are on the way too, meaning more can be passed on to your family without it being taxed.
Currently, each individual can pass on assets worth up to £325,000 tax-free, with anything in excess of this taxed at 40 per cent, however if an estate is left to a spouse, civil partner or charity, it won’t be taxed regardless of its size.
Inheritance tax can become an issue when assets are passed on to children after the death of the surviving spouse or civil partner, with the survivor of the estate only currently having a combined tax free allowance of £650,000.
From April 2017 a new allowance is being introduced of an additional £100,000 per person, with the Government phasing in a further £25,000 allowance a year until it reaches £175,000 per person in 2021, meaning an individual would then have a total tax free allowance of £500,000.
This additional allowance can only be set against the value of a residential property, allowing a couple to pass on their estate – worth up to £1million – to their children or grandchildren tax free. The new residential nil rate band will be available for estates worth under £2million.
Inheritance tax and estate planning is a complex area of law, therefore it’s important to seek specialist advice to manage your inheritance tax liabilities without delay.
For more information on inheritance tax and estate planning, contact Stephen Parr on 01706 233 439 or email him at Stephen.Parr@whnsolicitors.co.uk