Inheritance Tax (IHT) receipts reached £4.6bn for April to October this year, data from HMRC has revealed ahead of the Autumn Statement tomorrow (22 October).
While the Treasury will welcome this £500m increase from the same period last year demonstrating a year-on-year increase, this has firmly thrust the future of the tax into the limelight with the budget looming.
Rumours have been circulating about a potential cut to IHT, however recent speculation suggests this may be delayed until the Spring.
Laura Hayward, tax partner at Evelyn Partners, commented: “If the latest reports are to be believed, cuts to IHT are likely to take a backseat to other possible tax changes in tomorrow’s Autumn Statement.
“However, with Jeremy Hunt noting that ‘everything is on the table in an Autumn Statement’ it’s not impossible that we could still see changes of sorts to the IHT charging regime announced tomorrow.
To read more on this topic, visit: IHT receipts reach £3.9bn
“There has been some speculation that there could be a cut to the rate charged, which is currently levied at 40% on estates above the value of £325,000. Some have also suggested that the main nil-rate band (£325,000) could be combined with the residential nil-rate band allowance (currently £175,000) to give a total IHT-free allowance of £500,000.”
False sense of security
Even if IHT is placed on the backburner by Hunt, Julia Peak, tax and estate planning specialist at Canada Life, warns that people shouldn’t be lulled into a false sense of security that the tax will not apply to them.
She said: “Though generally house prices may have fallen in recent months, this is not the case for the whole country. While your house will take up a large proportion of your available nil rate bands, IHT is calculated on the whole of your net estate, which includes savings, investments and other assets owned by you, which are not exempt or held in a trust, as well as gifts made in the last seven years.
“The Standard and Residence Nil Rate Bands are currently frozen until April 2028, but we must remember, not everyone will be able to claim a residence nil rate band, it will depend on their circumstances and who they leave their house or value of their house to. Also Gifting records could mean that these have already been used, and so the ‘£1m of allowances’ might not apply to all.”
Regardless of what Hunt has instore for IHT tomorrow Paul Barham, partner at Mazars, highlights that starting estate planning as early as possible is key.
He said: “In many of these scenarios, the age-old advice of planning early is likely to stick. Estate planning needs time and that will always be true.”