Inheritance tax receipts jump 15% in a year
The government has collected £3.7bn in inheritance tax since April this year, up 14.6% on last year.
Higher receipts have come from rising house prices and a crack-down on avoidance schemes with the government likely to collect £5bn by the end of the year.
These rises come in spite of the introduction of the new Residence Nil Rate Band, which allows some people to pass on even more tax-free. This was introduced in April, and Inheritance Tax receipts have leapt by £472m over the same time last year.
Sean McCann, chartered financial planner at NFU Mutual, said: “It’s clear that the taxman is cracking down hard on inheritance tax by looking more closely at people’s estates and challenging claims for reliefs. You’d expect the introduction of the Residence Nil Rate Band would see receipts flatten out or even fall a little bit, but the opposite is happening.
“When inheritance tax receipts rise, it’s usually because of a buoyant housing market. But property prices aren’t rocketing in the same way, so it’s difficult to see what could have caused such a sharp increase in receipts other than a more aggressive approach to inheritance tax.
“The extra scrutiny from tax officials means those who haven’t taken professional advice or planned early could be caught out. This could have a catastrophic effect on family wealth. IHT is one of the more complex taxes and there are plenty of traps to fall foul of – as many families appear to be finding out.”
Five tips to minimise your inheritance tax liability:
- Use your annual gift allowance to give up to £3,000 a year (£6,000 if you use the previous year’s allowance as well) without incurring any IHT.
- You can give larger amounts, but you need to live for seven years after making the gift for it to be free of tax.
- Take account of the ‘normal expenditure out of income’ rule – if you give gifts out of your income and, in doing so, don’t damage your standard of living, they are exempt from IHT, and there is no upper limit.
- Make a will – this allows you to make the most of allowances and reliefs and be targeted in how you allocate your estate.
- Spread your giving over a number of years rather than paying out a lump sum.