HMRC have issued figures this week that confirm that inheritance tax (IHT) receipts increased steadily until 2007-08 due, they report to increases in the value of assets that were liable to IHT during the run up to the economic slump and in particular to the increases in the value of residential property. They hit a peak of over £3.6bn in 2007-08.
The amount of IHT collected annually then fell sharply as a result of:
1. the introduction of the Transferable Nil Rate Band for deaths occurring from October 2007; and
2. the fall in the value of residential property in the second half of 2008 and in most of 2009.
The amount collected fell to approximately £2.4bn in 2009-10 but has been rising year on year since then to a figure of around £3.6 bn in 2014-15 being the near to the peak levels in 2007-08.
If as reported by HMRC the increase arises from increases in the value of assets such as residential property it highlights that the need for careful IHT planning is increasing.
In addition the fact that the Nil Rate Band for IHT has remained pegged at £325,000 per person has resulted in an increase in the amount of IHT paid as asset values have increased.
IHT is often described as a “voluntary tax”, in that its payment can be avoided by a well drafted Will and some careful advance tax planning. It can in some cases be possible to reduce IHT liabilities after a death by making use of what is known as a “deed of variation”.
The cost of good, advance planning can be more than repaid in the IHT savings generated and it appears that many families may be paying far more in IHT than necessary by not planning ahead and taking advice.
Ian Newcombe is a partner in the private client team in Exeter office and he and he has a great deal of experience in providing IHT advice and in preparing Wills, trusts and other documents to help clients achieve IHT savings. To contact the private client team, please call 01392 210700 or email private.client.exeter@stephens-scown.co.uk.