Inheritance tax warning as households threat being hit with ‘surprising invoice’

HMRC introduced that Inheritance Tax receipts for April 2023 have been £0.6 billion. This is £0.1 billion increased than in the identical interval a 12 months earlier.

This means extra persons are getting caught within the tax entice, shedding extra of their hard-earned money.

Britons are being warned about an “unexpected” IHT invoice, with nearly three in 4 folks within the UK over the age of fifty unaware of the foundations across the levy.

‌A brand new survey from unbiased monetary advisory agency deVere Group has revealed that 72 % aged 50-plus and with taxable property didn’t know the IHT threshold was £325,000.

The inheritance tax nil-rate band, which is the utmost quantity an individual can inherit earlier than paying IHT, has been frozen at £325,000 since 2009 – regardless of hovering home costs.

Recent figures present that there was a 24 % surge within the variety of folks paying inheritance tax within the 2022-23 monetary 12 months, which is almost double what it was within the 2018-19 tax 12 months.

‌The Government’s IHT take appears to be rising thanks largely to years of home value will increase pushing households that wouldn’t most likely take into account themselves rich, over the edge.

Nigel Green, chief government at deVere Group advised Mortgage Introducer: “It’s very worrying that those with assets that could be raided by IHT had a lack of understanding about what is likely to happen.

“It puts these people’s families at risk of being hit with an unexpected, and potentially considerable, tax bill at the point of the death of a loved one.

“It’s even more troublesome as, in our experience, people feel so strong about inheritance tax: it is the most hated of all taxes.

“People despise the idea of money that they’ve already paid tax on being taxed yet again.

“It’s a human instinct that they would rather their loved ones benefit from their legacy than it being taken by the Government.”

‌With HMRC bringing in a report quantity of revenue from IHT, now could be the time for folks to ensure they’re clued up on the foundations round gifting they usually know the right way to minimize their legal responsibility.

Daniel Tomassen, senior supervisor at accountancy agency HW Fisher defined 3 ways to keep away from being caught out.

He mentioned: “Keeping things simple is the name of the game! If a married couple is considering making a gift, consideration should be made as to whether just one of them should make the gift. Typically you see the spouse who is in better health or younger making the gifts as they are more likely to survive seven years.‌

“Alternatively, to spread the risk then they may decide to each make a gift of 50 percent. This way the chances of at least one of the spouses surviving seven years is higher and therefore more likely that at least 50 percent of the total gifted amount is likely to fall out at least one of their estates for Inheritance Tax purposes.

“Consideration should be made as to whether a ‘gift inter vivos’ insurance policy should be taken out. For an annual premium the policy will cover the Inheritance Tax payable on the gift should they not survive seven years.

“This provides peace of mind to the executors of the estate who may not have sufficient liquidity to settle the Inheritance Tax bill on the gifts.”

Mr Tomassen added: “Keeping a clear record of gifts made can make life easier for the individuals dealing with the estate and calculating the Inheritance Tax payable.‌

“The deadline for HMRC enquiries for Inheritance Tax is significant and therefore good records can ensure the executors pay the correct amount of Inheritance Tax and minimise the chances of late payment interest and penalties being levied by HMRC.”