The UK government has reported record-high inheritance tax (IHT) receipts, largely due to the continued freeze on thresholds. With property values rising and tax-free allowances unchanged, more families are now facing increased tax liabilities. According to a Euronews report, the total IHT receipts have reached unprecedented levels, raising concerns among taxpayers.
Why Are UK Inheritance Tax Receipts Increasing?
The main reason for this surge is the freeze on the nil-rate band, which has been set at £325,000 since 2009. The residence nil-rate band (RNRB), an additional allowance for passing on a home to direct descendants, remains at £175,000. With property prices increasing, more estates are being pushed above these limits, leading to higher tax bills.
Understanding the tax implications is crucial for homeowners and investors. At Care Accountancy, we offer expert Tax Advisory services to help individuals and businesses navigate the evolving tax landscape.
How Inheritance Tax Affects Estates
Inheritance tax is charged at 40% on the portion of an estate that exceeds the tax-free thresholds. For example, if an estate is worth £600,000, the taxable amount would be £100,000 (after applying the £325,000 nil-rate band and assuming no RNRB applies). This results in a tax bill of £40,000.
For those concerned about these rising tax obligations, our Estate Planning Services can provide valuable strategies to reduce liabilities and secure wealth for future generations.
Planning Strategies to Reduce Inheritance Tax
To mitigate the impact of IHT, individuals can consider:
- Gifting assets: Gifts given at least seven years before death are tax-free.
- Using allowances: Annual exemptions allow tax-free gifts of up to £3,000 per year.
- Trusts and estate planning: Setting up trusts can help manage tax exposure.
- Life insurance policies: A life insurance policy written in trust can help cover tax liabilities.
For more details on inheritance tax rules, visit the UK Government’s official guidance.
What’s Next for UK Inheritance Tax?
With the UK economy under pressure and calls for tax reforms growing, there is speculation that the government may review inheritance tax rules. However, until changes are made, families must proactively plan their estates to minimize tax burdens.
At Care Accountancy, we understand that inheritance tax can be a complex and overwhelming concern for families and individuals. Our team of tax experts offers personalized estate planning and inheritance tax solutions tailored to your financial needs. Whether you need assistance with tax-efficient gifting, setting up trusts, or ensuring your estate is structured to minimize tax liabilities, we provide expert guidance every step of the way. Contact us today to explore how we can help you protect your wealth and secure a financially stable future for your loved ones.
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