21st Jul 2022

How Planning Your Estate Now Could Reduce Inheritance Tax

More estates are paying inheritance tax every year: does this affect you, and what can you do about it?

The latest figure for the amount of inheritance tax paid by estates in England and Wales rose by 13% to £6.1bn for 2021/22.

This is not a surprise to us: we have had a period of rising property prices, along with the freeze in the inheritance tax free allowance (called the nil rate band) until April 2026 – that allowance remaining at the same level since April 2009 (despite the impacts of inflation). This has pushed many more estates into paying inheritance tax, and those estates that pay the tax are also paying higher amounts.

The Office for Budget Responsibility predict that inheritance tax receipts will increase by a further 36% in the next 4 years to £8.3bn in 2026/27.

As more estates are caught by the frozen tax thresholds, do you know whether your estate is likely to pay inheritance tax when you die? If so, do you know how much your estate is likely to pay, and what you might be able to do to reduce this figure?

We recommend you take advice now to review your estate and look at some planning options.

Your advisor is likely to discuss matters such as:

  • If you have been widowed, does your estate qualify for a transferable nil rate band?
  • Does your estate qualify for the residence nil rate band?
  • Have you considered gifting assets – either outright or to a trust?
  • Are you using your annual allowances for inheritance tax, and are you able to gift excess income?
  • If you have inherited assets in the last 2 years, have you considered a Deed of Variation to ringfence those assets from inheritance tax?
  • If you want to gift money to charity in your Will, is it worth gifting up to 10% of your estate to qualify for a lower rate of inheritance tax?
  • Do your business or farming assets qualify for valuable reliefs?

Julie Jewers and Jeremy Bristow are Solicitors in Berwins’ Life department. Call our friendly team on 01423 543 102 to arrange a meeting where we will review your estate and assess your options. 

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