New Record High For Inheritance Tax Payments
New figures from HMRC show an alarming 13% year on year rise in Inheritance Tax receipts, raking in a staggering £5.3 billion to the end of February. These record sums forced Chancellor Phillip Hammond to instigate reforms in the notoriously complex IHT system.The review of the system was ordered at the end of January but the timescale is unclear and the threshold of IHT (which has remained at £325,000 since 2009) has not been cited thus far.Interestingly, the combination of the unchanged IHT threshold and soaring property prices are the main reasons that more people are eligible for death duties. Substantial portions of peoples’ estates are now being taken, often quite unexpectedly, by HMRC through IHT. The value of these is rising at a startling rate and no one wants their descendants to be landed with hefty and avoidable IHT bills.The Government have introduced the residence nil rate band (RNRB) which was gradually bought in from April 2017. Under the RNRB married couples or those in civil partnerships will eventually have an extra £350,000 worth of IHT free allowance per couple. Unfortunately it is not fully phased in until the 2020/21 tax year and the rules are extremely complex.Another quirk in IHT which needs resolving is extending civil partnerships to couples of different genders and the next step in this change would be full legal rights for unmarried and non civil partner cohabiting couples. Since 2006 the law in Scotland gives some cohabitees some rights but not to tax exemptions and the Law Commission in England and Wales did not suggest that in its’ report at the time.The President of the Supreme Court has said several times that cohabiting couples should have more rights when their relationship ends but she has not suggested tax rights on death. At the moment, a bereaved partner without legal status may not just be landed with a large and perhaps unexpected IHT bill, they can also lose their home.Lord Willetts said recently that IHT was “poorly designed, widely abused and a classic bad tax with a very high rate and very high exemptions”. He went on to say “we could lower the rate but with a broader tax base which would be fairer for all”.If you wish to avoid or reduce this punitive tax, careful planning from an IHT specialist is invaluable, contact us now.