HB - The Legal Corner Magazine #Issue 7

BY ARTI THAKRAR Senior Associate Solicitor Wills, Trust & Probate

Between April 2023 and January 2024, HMRC recorded £6.3 billion in Inheritance Tax (IHT) receipts which is £400 million higher than the same period the previous year – a 6.34% increase. According to a review by Evelyn Partners, the Treasury was on course to receive approximately £7.6 billion in the 2023/24 tax year. This is perhaps due to inflation, the increase in house prices and the freezing of the Nil Rate Band (NRB) and other IHT exemptions/allowances. Arti Thakrar discusses how IHT can be mitigated. We are grateful to Ivar Sala of Evelyn partners for his insight to the article below. IHT is a tax which can be payable in your lifetime and on death. Since 2009 all individuals in the UK have an IHT threshold of £325,000. The first £325,000 is taxed at a rate of 0% with everything above £325,000 potentially subject to IHT at 20% (lifetime IHT rate) or 40% (death rate). If you have assets abroad, they may also be subject to foreign taxes. ‘Arguably, the most enjoyable way of reducing IHT is spending the estate – going on longer holidays, cruises and enjoying the finer things in life. It's called going SKI-ing – Spending the Kids' Inheritance. It may also help to spend more if you think that everything now comes with a 40% discount. The key issue is making sure you have enough to last for your own lifetime,’ notes Ivar Sala, Chartered Financial Planner at Evelyn Partners. Additionally, ‘It is possible to insure against the potential IHT liability for the recipient and also insure the temporary loss of the nil rate to the donor's estate. This type of insurance gives the donor peace of mind as it makes sure this part of their estate planning will be successful.’ However, outside of this, to mitigate the IHT payable, you may be thinking about gifting some of your wealth to ensure your heirs receive more of it. Different gifts may have different tax consequences. If you are married or in a civil partnership and you have left your Estate to your spouse/civil partner, upon your death the Estate may not have to pay IHT (depending on the timing of gifts given during your lifetime). The survivor’s estate will have the benefit of twice the IHT NRB of £325,000 on their death, equalling £650,000.



Made with FlippingBook Ebook Creator