Inheritance Tax (IHT) is a tax on inertia, ignorance and people’s reluctance to confront the issue. Consequently, for many it is a voluntary tax – money which could instead stay in the family to support future generations.
Yet last tax year saw the government benefit from IHT to the tune of £4.6 billion, the first time annual revenues have exceeded £4 billion, and a 21% increase on the amount of tax paid in the previous year¹. The number of estates on which IHT has been paid has quadrupled since 2010.
But there are perfectly legitimate ways of mitigating IHT through foresight and careful planning. Making full use of your annual gifting exemption of £3,000 is one such solution.
Your annual gift exemption from the last tax year can also be carried forward, but if you don’t use it by 5 April it will be lost forever. That means a couple could potentially remove £12,000 from their joint estate immediately.
Gifting is one way of lessening the burden of IHT on your heirs and giving a helping hand to other generations of your family.
The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.
¹ HMRC, November 2016