Inheritance tax (IHT) receipts fell for the first time in a decade in the 2019/20 tax year, new Treasury figures have shown. Data revealed that the Inland Revenue raked in £5.2bn from IHT receipts in 2019/20, a figure reflecting a 4% drop worth £223m in comparison to the previous tax year.
The 2017/18 tax year was the first time in which the residence nil-rate band (RNRB) tax-free threshold could be used, which provides an additional allowance to qualifying estates so that more wealth can be passed on to a direct descendent before IHT must be paid.
In the year the RNRB was introduced, 20,200 estates used the threshold, and £3.1bn of chargeable estate value was sheltered from an IHT charge as a result.
As well as the individual IHT-free allowance of £325,000, individuals may use the RNRB to pass on their home to direct descendants without paying tax on the first £175,000 for the current tax year. This has increased from £100,000 in 2017/18.
For married couples, unused IHT allowances can be inherited by a surviving spouse on first death, which means that on second death, estates valued at up to £1Million can be exempt from death duties.
Of course, the generosity of these allowances came at a time when economic conditions looked far more certain and favourable, hardly reflective of the conditions we face today. Therefore, it would be no surprise if the Government targets IHT and the residence nil-rate band allowance perhaps as one of a catalogue of measures to repay a proportion of its colossal debt.
For those that seek professional financial advice, you will no doubt have been informed of various other tax-efficient and legitimate options to mitigate and possibly even avoid altogether the payment of Inheritance Tax on your ultimate demise. We have considerable experience in this field from our thirty-five years’ existence and have assisted many families over the years. We have also written many Wills for these clients as part of a coordinated strategy, again to ensure that their wishes are respected in the most tax-efficient manner possible. Please do contact the office if you would appreciate assistance.