As Inheritance tax (IHT) receipts hit a record for the Treasury, is it time to review your estate planning ahead of any changes in the Budget?
2017/18 produced record Inheritance tax (IHT) receipts according to HMRC data published in July.
The latest release of the annual statistics revealed IHT produced £5.228 billion for the Exchequer in 2017/18. That’s an increase of two thirds over just five years and, as the graph below shows, IHT revenue has been rising rapidly since Treasury receipts hit a low in 2009/10, owing to the combined impacts of the financial crisis and the introduction of the transferable nil rate band.
The Independent Financial Advisers at Pembroke Financial Services, who specialise in Inheritance Tax planning strategies, understand that the Office for Budget Responsibility (OBR) expects the growth in revenue to continue, although the rate of increase will slow for the next few years because of the introduction from April 2017 of the residence nil rate band (RNRB).
The Office of Tax Simplification (OTS) is currently undertaking a ‘general simplification review’ of Inheritance tax. The OTS is primarily concentrating on the administrative aspects of IHT, but it is also looking at the “complexities arising from reliefs and their interaction with the wider tax framework”.
Given that the OTS is due to report ahead of this year’s Autumn Budget which will be sometime in November, it is possible that changes and/or pre-emptive legislation will be announced then.
It is unlikely that reforms will lead to a reduction in the money raised by IHT. Inheritance Tax might well be may be the most unloved tax in the UK, but Mr. Hammond has to find an extra £20.5 billion a year for the NHS by 2023 and IHT receipts are above £5 billion a year and rising. The politics of any cut would also be difficult to implement.
There is a case for reviewing your inheritance tax planning now and possibly taking some action ahead of the Budget. The advent of the Residence nil rate band – which was introduced in April 2017 and takes full effect in 2020/2021 – may have reduced inheritance tax for many, but the provisions are complex and now would be a good time to review your estate, your Will and your plans for the future.
Tax simplification often brings to mind the words of ‘Big Yellow Taxi’ by Joni Mitchell:
“Don’t it always seem to go
That you don’t know what you’ve got ‘til it’s gone.”
We promise we won’t sing but please get in touch if you need any help in understanding the intricacies of Inheritance Tax planning.
Please Note: The value of tax reliefs depends on your individual circumstances. Tax laws can change. The Financial Conduct Authority does not regulate tax advice.
