Inheritance Tax – Changes Ahead?
As every year passes, more and more is collected by HM Revenue & Customs from Inheritance Tax. Receipts for 2017/18 rose a record 13% to £5.3 billion compared to the previous year. Since 2009/10 tax raised from Inheritance Tax has increased by, on average, 12% per year.
This is hardly surprising given that Inheritance Tax allowances have been frozen at £325,000 since April 2009, not even keeping pace with inflation. Whereas asset values, especially property, have increased ahead of inflation meaning more and more people are being caught in the Inheritance Tax net
Inheritance Tax is not going away and in the age of austerity is an appealing way to raise funds for the central government.
HM Revenue & Customs are constantly looking ay ways to increase the tax receipts from Inheritance Tax and a recent letter in The Times from the former head of The Capital Taxes Office gave some clues as to what areas might come under scrutiny.
The abolition of Agricultural Property Relief (APR) on let land has been mooted. This is a valuable relief for many agricultural landowners up and down the country and can give 100% relief from Inheritance Tax but appears to be vulnerable to attack.
The surplus income exemption, which is currently uncapped, is also in the line of fire. This valuable tax planning tool allows those with surplus income to gift the surplus income without it being subject to the usual 7 year rule associated with gifts of capital, provided the qualifying criteria are met.
Over the last 6 months, there have been 4 reports on reforming Inheritance Tax, with the latest being published by David Willets of the Resolution Foundation. It is clear that change is coming.
All individuals should carefully consider whether Inheritance Tax is going to effect them and seek appropriate advice. A properly prepared will along with estate planning can help significantly reduce the potential Inheritance Tax burden on an estate.