Inheritance tax (IHT) receipts increased by £165million last month, according to HMRC’s latest data. In the month of March 2019 IHT receipts accounted for £537million, up from £372million in February 2019, showing a growth of 44 per cent. Further to this, Rachael Griffin from Quilter confirms that IHT receipts for April 2018 to March 2019 are 3.1% higher than the same period last year and the 2018/19 tax year shows that IHT receipts are at their highest level, both in annual revenue and as a proportion of Gross Domestic Product.
2018/19 IHT receipts totaled £5.4billion, up from £5.2billion the previous tax year, with the amount of IHT collected by HMRC having continuously increased from 2009/10. There was a sharp drop in IHT receipts from 2008/09 due to both the introduction of the transferable Nil Rate Band for deaths occurring from October 2007 and a fall in the value of residential property in the second half of 2008 and in 2009.
The Nil Rate Band, also known as the IHT threshold, is the amount up to which an individual’s estate has no IHT to pay and currently stands at £325,000 for 2019/20. The Residence Nil Rate Band is an additional threshold available where the deceased left a residence, or the sale proceeds of a residence, to their direct descendants. This threshold now stands at £150,000 for 2019/20 and is due to increase annually by £25,000 each April up until 2020 and then increase every year in line with Consumer Price Index (CPI) thereafter. Any estate value exceeding this amount will incur a 40% tax liability on the amount over this threshold. Any unused Nil Rate Band and Residence Nil Rate Band can be transferred to a surviving spouse or civil partner, potentially doubling their IHT threshold.
Whilst the allowances are valuable and can mean an estate will not suffer an IHT liability, they do not apply to everyone and so careful consideration is necessary. There are some assets and investment wrappers, including pensions, which are exempt from IHT and should be considered. IHT planning is one aspect of financial planning that is often neglected, which can, in many instances, be a very costly error of judgement. Therefore, if you would appreciate help with this or any other area of tax planning, please do not hesitate to contact us and make a mutually convenient appointment with our team of fully qualified and dedicated financial advisers.