Inheritance tax THE
To minimise the chunk that HMRC might bite out of your estate on death, it would be wise to start planning now, says Simon Lewis, CEO of Partridge Muir & Warren
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billion over the next five years. The big picture is that the government is struggling to raise the revenue it needs to maintain the welfare state and there are no easy solutions. Demands on the State, based on current levels of provision, are only going to increase as the population ages and it is getting harder to raise the tax necessary to sustain this. It is arguably more effective to tax estates than it is to tax individuals who are in work, because if you tax individuals too much
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ne thing I have noticed over recent years is that a lot more people are becoming concerned about the impact of inheritance tax (IHT) on family wealth. It is not surprising because it is becoming an increasing problem for many families, particularly those in the South East. People often have a vision of their wealth cascading down through future generations to make members of those generations more financially secure; but the reality is that if you take a big slice out of that money on death to pay tax, it has a permanent long term impact on the amount of family wealth that can be accrued. Recent statistics show just how much the tax is starting to bite. In the 2009/2010 tax year there were 15,000 estates that paid IHT and by 2016/2017, just over seven years later, that number had doubled to 30,000. The tax currently contributes around £5 billion each year to the Exchequer and this is forecast to increase to £7
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SURREY BUSINESS
then you take away the incentive to work and that is bad for the economy and in turn, tax receipts. There are so many reasons, not just those that are politically motivated, for the government to make inheritance tax carry more of the tax burden. With this in mind, it makes sense to plan now to minimise the chunk that HMRC might bite out of your estate. The standard IHT exemption (nil rate band) has been frozen at £325,000
since 2008/2009 and is not set to increase until 2021/2022. This creates a lot of what we call ‘fiscal lag’; when the government increases exemptions at a slower rate than the rate of growth in assets, or indeed income, leading to a proportionate increase in tax. If we think about how much residential property has risen in value since 2008, particularly in the South East, it has had a big impact on the amount of IHT that is going to become payable.
PEOPLE OFTEN HAVE A VISION OF THEIR WEALTH CASCADING DOWN THROUGH FUTURE GENERATIONS TO MAKE MEMBERS OF THOSE GENERATIONS MORE FINANCIALLY SECURE
