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Inheritance Tax at an all-time high 

With the news that once again, the year to 31st May 2018 has been a record breaking year in terms of revenue raised from inheritance tax, Lodders’ Vicki Gulliver, a Chartered Legal Executive in Lodders’ Private Client team explains the importance of seeking legal advice to ensure that sufficient planning is done to try and mitigate IHT.

A recent report published by the HMRC has found that inheritance tax (IHT) has reached an all-time high of £5.2 billion despite the recent introduction of a nil-rate band for family homes. The recent report show there has been an increase in IHT of 8%, which equates to £388 million when compared to the amount paid in 2016-17 and has been steadily rising since 2010. The continued rise since 2010 is a direct cause of economic growth and rising house prices.

The current system

Under the current nil-rate system, which implemented in 2010, a person’s estate is allowed to be worth £325,000 before IHT is claimed. This rises to £650,000 for married couples and any person widowed. However, the current banded system fails to take into account rising house and share prices meaning more estates could be liable to pay large amounts of inheritance tax over the next few years.

The report also reveals that between the financial years 2009/10 to 2015/16 the net value of estates rose by £17 billion. The reason behind this being an increase in residential property, further indicating that IHT will continue to rise over the coming years as with the ever increasing price of  property.

The residence nil rate band (RNRB)

Last April, concern over rising property prices prompted the government to introduce an extra £100,000 allowance per person for family homes passed to children or grandchildren – the residence nil rate band.

The effect of continued growth in asset prices is partly offset by the rising path for the main residence nil rate band. The RNRB will increase each year until 2020, when a couple will be able to bequest a home worth £1m without incurring tax.

However, a separate Freedom of Information request from financial advice firm NFU Mutual showed that as few as one in six estates have used the new exemption.

Vicki explains: “The legislation surround IHT is complex and consulted. Effective, forward planning can help to ease the burden on those left behind, should the inevitable happen. At Lodders, we have the expertise to advice on the various relief and exemptions which may be available and could be vital tools in reducing tax liability.”

“We can offer advice on wills, gift allowances, trusts, tax efficient investments and estate planning. In the current financial environment, it is vital that tax affairs are dealt with expertly. Effective estate planning and the use of specialist trusts can enable you to maximise your use of inheritance and income tax allowances and provide valuable funding for education or a first home, whether for children or grandchildren.”

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Diane Wood, V Formation on 07887 794507 or by email

Get in touch

For more information, please contact Vicki Gulliver on 01789 206916 or get in touch with your usual contact in our Private Client team.