Page 17 - LCNL News & Events August 2021

ADVERTISING FEATURE

Over the

threshold

Record Inheritance Tax bills
are a reminder of the need
for good estate planning

here are few more confusing heirlooms might actually have to be effect death duties can have on
– or unpopular – taxes than sold to meet the tax liability on death. families’ plans to create and pass
Inheritance Tax (IHT). In on wealth. There are many perfectly
TOctober 2019, HM Revenue The previous rises in receipts largely legitimate ways of mitigating IHT
and Customs published Estimated reflected the surge in residential through foresight and careful financial
Costs of Tax Reliefs indicating further property prices, as well as the recovery planning. The mitigation of IHT does
confusion and inertia as it expects to in other asset values, which has not require high-powered tax planning;
see a 19% increase in IHT revenues dragged more households into the IHT only a willingness to discuss the issue,
over the next four years. net. From April 2020, the residence nil- act and make use of the many options
rate band rose to £175,000, for those available, establishing trusts* where
For older generations, paying up to 40% who qualify. appropriate; and making use of annual
tax on what they leave behind is difficult exemptions such as gifting.
to contemplate. For some children and
grandchildren, grappling with IHT is Once considered a tax on the The rules surrounding IHT on individuals
something they are ill-equipped to do. truly affluent, IHT now affects domiciled in the UK – or resident – are
more estates than ever complex. Certain transfers are also
Yet more and more families are having deemed exempt from the tax if they
to deal with IHT. The latest figures show pass between a husband and wife or
that IHT receipts reached £5.1 billion in Coupled with the fact that up to the civil partners.
the 2019/2020 tax year, according to first £325,000 of an individual’s estate
an HMRC tax report published in May may be exempt from IHT, this will mean If you are uncertain about where you
2020. Although a fall of £0.4 billion that, subject to certain conditions, a stand regarding IHT and would like to
from the previous year, this was likely married couple and civil partners could know more about how to minimise the
due to the increase in the residence have a combined tax-free estate worth sums falling into the hands of HMRC,
nil-rate band threshold, which has been £1,000,000 in the 2020/2021 tax year. or your local authority through long-
introduced in stages since 2017-18. term care fees, you should seek advice.
Despite this, at the heart of this The levels and bases of taxation, and
It will undoubtedly come as a shock problem remains the simple fact that
to discover that a large proportion of IHT could be considered a voluntary reliefs from taxation, can change at any
time and are dependent on individual
your wealth, which includes the family tax; the Treasury relies on inertia and circumstances.
home, investments including Individual people’s reluctance to confront the
Savings Accounts (ISAs), life assurance issue. The boost to the Treasury’s * Trusts are not regulated by the Financial
plans not in trust, and even old family coffers is a reminder of the damaging Conduct Authority.

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