Inheritance tax planning should remain a priority for many households, despite a recent call from one Government Minister to scrap the tax.
Law firm Kingsley Napley says furore over the Government’s mini-budget last month means abolition of inheritance tax is now no more than a political pipe dream.
Earlier this month, Treasury Minister Andrew Griffith called on the Government to be ‘politically brave’ and eliminate the tax altogether.
James Ward, head of private clients at Kingsley Napley, says a move to abolish inheritance tax (IHT) ‘would surely be as unpopular as the 45p income tax fiasco’. As a result, he says ‘planning to mitigate future IHT liabilities makes great sense for many households’. Inheritance tax is currently charged at 40 per cent on the value of estates above £325,000. But if everything is left to a spouse, civil partner or charity, it is not levied.
Plan ahead: Abolition of inheritance tax is now no more than a political pipe dream
There is also an additional allowance for those who gift the family home to children and grandchildren.
An array of steps, says Ward, can be taken to mitigate IHT – most involve gifting money. For example, someone can make small gifts of up to £250 per tax year to as many individuals as they choose.
Analysis of the latest data on IHT from Revenue & Customs indicates that it is estates in London and the South East that pay the most tax. This is a reflection primarily of house prices.
For the tax year ending April 2020, Kingsley Napley says it was the London boroughs of Kensington and Chelsea, Barnet, Camden and Westminster that yielded the highest amount of IHT.
In the last tax year, IHT raised £6.1billion in receipts, up from £5.2billion in the tax year ending April 2020.
But the annual take could fall if there is a correction in house prices in the coming months.
