In November 2022 the government fixed the Nil Rate Band (NRB) and Residence Nil Rate Band (RNRB) at their current levels until April 2028. In the same month the rate of inflation hit 10.7%. In the 12 months to November 2022 the average house price increased by 10.9%. For many of us, inheritance tax was never something we needed to consider – but that is rapidly changing.
The Nil Rate Band (NRB) – which is the amount up to which an estate has no inheritance tax (IHT) to pay – has been set at £325,000 per person since 2009. Since 2017 every taxpayer has also benefitted from the Residence Nil Rate Band (RNRB) provided their main residence passes to descendants. This currently shelters up to £175,000 of the value of your home. Although overall IHT revenue dropped after the introduction of the RNRB, it is now on the rise again. IHT revenues increased by 14% between 2020/21 and 2021/22 and it is likely that this growth will continue as inflation and property prices continue to rise, with more estates being caught by the tax net.
Despite the proverbial certainty of death and taxes, very few people seek any certainty over their own inheritance tax position or realise that it often only takes quite simple measures to reduce their potential liability.
Just as preparing a will in life will reduce the legal and administrative burden your family deals with on your death, having an IHT plan will reduce any pressures on them financially.
It may be that you are happy to know that you have the relevant liquid resources to cover your liability, or you are happy to indemnify your estate against the anticipated bills. In either case you will need a good idea of what that liability will be.
You might want to seek to maximise business or agricultural reliefs on your assets to reduce your liability – we can help you to review the application of relief to your particular business and to strengthen your claim for reliefs.
Are you willing to reduce your taxable estate by gifting assets during your lifetime to the next generation – we can help you determine how best to do this without triggering capital gains tax.
If you are happy to gift assets but want to maintain some control over them, we can guide you through the process of gifting into a trust.
Whatever your objectives we can assist you with a plan that will both mitigate tax and prepare you and your family for the future.