With the ‘Great Wealth Transfer’ set to see up to £5.5 trillion of assets passed down between generations between now and 2050, inheritance tax planning will be crucial.
The latest figures from HM Revenue & Customs show that Inheritance tax receipts for April 2024 to June 2024 were £2.1 billion, up £83 million on the same period last year as the government continues to see its tax take rise.
Laura Hayward, tax partner at Evelyn Partners, said: “As the wave of inheritance is set to grow over the next thirty years, the temptation for successive Governments will be to tap into it to plug gaps in the public finances.”
One think-tank economist has already urged the new Chancellor Rachel Reeves to consider bringing defined benefit pension pots into the remit of IHT, ahead of Labour’s first big fiscal statement expected in October.
In March 2010, the last Labour Budget, former Chancellor Alistair Darling froze the £325,000 IHT Nil Rate Band, a policy that has remained in place under Tory-led governments ever since and had helped the Treasury to grow its inheritance tax take.
With property prices continuing to surge, IHT thresholds remaining unchanged and more people set to inherit vast sums of wealth, it is expected that a growing number of estates will be dragged into the net. According to the Office for Budget Responsibility, the share of deaths resulting in the payment of inheritance tax will rise to 6.3% by 2028-29, the highest level since the 1970s.
Rosie Hooper, chartered financial planner at Quilter Cheviot, said: “Given these projections, the need for expert financial planning remains crucial. Financial planners can help manage an estate by setting up trusts, making use of gift allowances, and using a pension to pass on wealth to family members in a tax-efficient way.”
Stephen Lowe, group communications director at Just Group, expressed a similar sentiment.
“Every quarter we continue to see inheritance tax raising ever more money for the government and the trend looks set to continue. Frozen thresholds and property prices are expected to keep tipping more estates over the threshold, generating growing revenues for the Treasury.
“For people who think they may be affected by IHT we recommend they regularly review the entire value of their estate, including obtaining an up-to-date valuation of their property. Speaking with a professional, regulated adviser will then help in understanding how to legitimately manage exposure to the tax.”
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