Increasing revenue for HMRC through inheritance taxes - how can one dodge this liability?

The world of inheritance tax is a complex one, and with the increasing wealth transfer expected over the next three decades, it's a topic that's gaining more attention.

According to recent data, London and the South East account for over half of the total Inheritance Tax (IHT) paid in England. This is largely due to the higher property values and wealth concentrations in these regions. In the 2021/22 tax year, 4.39% of deaths resulted in an IHT charge, with a total of £5.99bn being paid in IHT, an increase of £230m on the previous year.

The Office for Budget Responsibility has forecasted that by keeping the thresholds frozen at £325,000 plus £175,000 for the primary residence nil-rate band, the share of deaths resulting in an IHT bill will hit 6.3% by the 2028/29 tax year. This means more of us are going to pay IHT in the future, emphasizing the need for estate planning and understanding the facts of inheritance tax to dispel inheritance tax myths.

One area the chancellor could tinker with is the agricultural property relief (APR) and business property relief (BPR), which protected £4.4 billion of assets from tax in the 2021/22 tax year. Labour might opt to remove APR for those who do not actually own farmland and BPR where it doesn't meet the intention of the relief i.e. protecting small businesses being kept 'in the family'.

Another option might be that the government looks again at the rules that exempt inherited pensions from IHT. The exemption between spouses and civil partners protected £15.5bn of assets from the taxman in 2021/22.

It's worth noting that there are no specific publicly available figures for the total amount of IHT payments for the year 2028/29. However, it's expected that the government will make almost £9bn from IHT in 2028/29.

The new Labour government is generally presumed to consider IHT as a potential target for a hike in the October Budget. This could lead to a significant increase in the IHT bill for many families.

HMRC may also increase investigations, potentially providing a useful source of extra funds from families accidentally understating the value of the estate.

In conclusion, with the growing wealth transfer and the potential changes in IHT policies, it's crucial for families to understand the current rules and consider their estate planning options carefully.

Increasing revenue for HMRC through inheritance taxes - how can one dodge this liability?