It was Benjamin Franklin who famously quoted back in 1789 “in this world nothing can be said to be certain, except death and taxes” (although perhaps Usain Bolt winning Olympic Gold in the 100m sprint at the last three Olympics should also be added to this) and recent figures released by HM Revenue and Customs (HMRC) show that “taxes on death” are even more likely.
These figures show that a record £4.7 billion was paid in Inheritance Tax (“IHT”) in the year ended 5 April 2016. This figure is up 22% from the previous year and double what was paid five years ago. However, it appears that the recent death of Duke of Westminster (worth in excess of £9 billion) is unlikely to generate a significant IHT bill for that estate.
The main reasons for the dramatic increase in the amount paid are varied, but perhaps the most significant of these are:
1. The recovery in house prices since the property crash in 2008, meaning more and more people are being dragged into the IHT net, and
2. The fact that the IHT threshold has been frozen since 2009.
In addition, the focus of HMRC has changed in recent years and they are now looking a lot closer at the entries on IHT returns and are raising a lot more enquiries. With rising property values, HMRC have been very successful in challenging probate values which they consider to be low.
A final area where HMRC have raised additional revenues are the penalties which they apply when people have completed the forms incorrectly, even in cases where there are genuine errors.
It is probably fair to say that IHT is very unpopular with the general public and yet more and more people are failing to plan for the inevitable. Lord Jenkins said that that “Inheritance Tax is a voluntary tax, paid by those who distrust their heirs more than they dislike the Inland Revenue!”
Taking timely tax and financial advice as well as making an effective Will could reduce or even eliminate your IHT bill altogether. Paying unnecessary IHT (along with penalties if you incorrectly fill out the forms) will only reduce the amount your family and loved ones receive.
There are various planning options and statutory reliefs available depending on your personal circumstances which could ensure that your hard earned wealth is preserved for future generations.
If you would like to discuss the options available to you, please contact Rachael Dronfield.
