Inheritance tax (IHT) receipts have fallen for the first time in more than 10 years, according to the latest data from HM Revenue & Customs (HMRC).
Official figures show that HMRC received £5.2 billion in IHT receipts in the 2019/20 tax year, a drop of four per cent (£223 million) on the previous year’s figure.
Both the total number and the proportion of individuals liable for IHT dropped for the first time since 2010, with the Government attributing the fall to the introduction of the residence nil rate band (RNRB) in 2017.
The RNRB means that in addition to the main tax-free allowance of £325,000 per person, individuals can bequeath their main property to a direct descendant without paying any tax on the first £100,000.
However, any inheritance above the £325,000 allowance attracts IHT at a rate of 40 per cent.
The importance of estate planning
While the recent figures show the first drop in IHT receipts in a decade, previous research has indicated that more than 50 per cent of over 50’s do not seek IHT advice.
Estate planning is a key part of ensuring that your legacy is passed on in the most tax-efficient manner.
There are ways to mitigate your IHT liability, and there are exemptions and reliefs which can be used to mitigate the tax, such as passing property to direct lineal descendants using the residence nil rate band (RNRB) or using the surviving spouse, civil partner or charity exemptions.
Additionally, there are many different tax-free allowances for making gifts, including an annual exemption of £3,000, regular gifts out of excess income and gifts up to certain limits to specified relatives.
Preparing a Will that is valid, up-to-date and legally binding is essential to avoid lengthy probate cases, ensuring that your wishes are fulfilled.
For help and advice with matters relating to inheritance tax and estate planning, speak to our expert team today.