Inheritance Tax Warning!
Recent research has shown that the majority of UK residents over 55 years old have no idea what Inheritance Tax may be due on their Estate in the event of their death.
A survey by Time Investments has found that 52% of those surveyed, aged over 55, don’t know what their liability may be. 31% of these had never checked the Inheritance Tax rules, or how it may apply to them.
As part of the Spring Budget, the Chancellor announced that the applicable tax free allowances for Inheritance Tax were to be frozen. This, coupled with rising house prices, is likely to increase the number of people whose Estates will exceed the Inheritance Tax thresholds.
What are the limits to consider?
The Nil Rate Band (NRB) for Inheritance Tax is to be frozen at £325,000, and the Residence Nil Rate Band (RNRB) is to be frozen at £175,000 until April 2026.
These bands work together, but consider any Principal Private Residence first.
- As an example, if you have a property worth up to £500,000, you would pay no tax on that property, as you’d use both the NRB and RNRB.
- If you have a property worth £425,000, you’d pay no inheritance tax on that property. If you also had £25,000 other assets however, you’d pay 40% on those, as you’d have drawn on the full allowances for the property.
The £175,000 RNRB is ONLY applicable to property and not for any other assets.
The five-year freeze on Inheritance Tax is expected to raise an extra £985million in extra revenue. This will arise from an extra 11,000 estates that are expected to become liable to IHT per year by 2026.
If you haven’t yet considered the impact of Inheritance Tax on your Estate, it’s becoming increasingly important! We can discuss this with you, or you may wish to raise it with your Financial Advisor.
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