Unsuspecting consumers being hit by IHT bill
In the tax year of 2016/17, IHT drew £4.7 billion from UK consumers and is estimated to be a third higher (£6.2 billion) in the upcoming 5 years - the inheritance tax amount being at 40% on anything over £325,000.
Financial planning rise
The unwarranted reluctance of people to use financial advice plays a big part in the rise. As the Inheritance Tax rules are so complicated, it is definitely worth getting financial advice as it may cost some money in fees at the time, but will save significant money in the long run.A lot of people put financial planning to the back of their mind when they may be 20 years off the retirement age, as they think that they will live 20 or 30 years past retirement. But you may die earlier than the retirement age all together, which is why you need to consider it much earlier. You don’t want your family to have the burden of IHT after your death.
Rise in the bill of IHT
HMRC think that the rise in the bill of IHT is because of the continuous rise of asset values, property being the main one. Because of the rise in estates and assets, it means that your assets would then be over the residential nil rate band of £325,000.You cannot underestimate how tough IHT rules are. HMRC are taking a large percentage of your estate which could be avoided if the correct and legal measures are put in place before it becomes an issue. You could pay an adviser £2,000 to implement financial advice but if you do not take action, then you could be paying HMRC more than 100 times that price.
Inheritance Tax nil-rate band
Since April 2017, there has been a £100,000 nil-rate band allowance when a residence is passed on to a direct descendant after death. This will increase by £25,000 per year until it reaches £175,000 in the financial year of 2020/21.With the Inheritance Tax nil-rate band and the ability to transfer unused RNRB to a surviving spouse or civil partner, it means that there is a total tax threshold of £1 million in 2020/21. The full use of this is complex and once again advice is essential.
Don’t be the person who buries their head in the sand, make sure that you face potential IHT bills as early as possible, to save your direct descendants from huge IHT bills. Contact us for any help making your first steps to having a pain free financial future.