More and more people are falling into the inheritance tax net, because of a combination of an increase in property prices and the freezing of the nil rate band and the residential nil rate band, which are currently frozen until 2026.
HMRC receipts from inheritance tax rose to £6.1 million during the year to March 2022 and it is expected that this will increase to £8.3 million by 2026/2027.
Whether you are someone who begrudges paying any more to the “taxman”, as it is in effect a double tax, paying tax during your lifetime on your income and then again on the wealth you have accumulated, or have the opinion that it is not your problem as you will no longer be part of this world, knowing what your liability might be means you can at least plan for it, if you want to.
I am seeing more and more clients who do not want the taxman to have any more of their hard-earned money.
The most important inheritance tax planning you can undertake is ensure you start early, because most planning requires you to survive 7 years in order for it to fall outside of your estate. In addition, making use of the various exemptions that are available is a must.
When looking at your wealth it is not only inheritance tax that needs to be considered but also your income needs and planning for potential care home costs. You do not want to be in a position where you have given away so much that you either do not have enough to live on, or in the event that you need to, you cannot go into the care home of your choice. The recent changes to the care home cap, also need to be factored in.
It is possible, if this is suitable for your particular circumstances, to give away capital and retain a right to an income from that capital.
Any planning of this nature needs to be done in conjunction with a financial adviser and within Morris Owen we can provide this joined up thinking having an independent financial services department, if a client does not have a financial adviser of their own.
If you would like to discuss your inheritance tax position then please get in touch.