In advance of the Autumn Statement, speculation was rife that changes to Inheritance Tax (IHT) would be brought in. However, Jeremy Hunt opted for no change last November. With a budget expected in March we think this is a subject that could resurface as we near the general election.
All signs are pointing to 2023 being another record-breaking tax year overall. IHT receipts for the period April to November 2023 were £5.2bn, which is £0.4bn higher when compared with the same period last year, according to HM Revenue & Customs (HMRC).
This increase in IHT receipts contributed to total HMRC receipts for the period from April to November increasing by £24bn from 2022 to 2023 – total receipts reached £515.9bn. Cash receipts were higher mainly from Income Tax, Capital Gains Tax and National Insurance Contributions (NICs) (£12.1bn), VAT (£8.2bn), and business taxes (£7.3bn). Cash receipts were lower mainly from Stamp Duty (£3.7bn) and Tobacco (£1.1bn).
More people choose living inheritances
It’s no wonder then that there has been an increase in the number of people who are choosing to gift significant sums of money to beneficiaries whilst they are still alive – otherwise known as a ‘living inheritance.’ One in 10 respondents to the Great British Retirement Survey 20231 said they had given a living inheritance in the past three years. This increased to 15% amongst over-65s. Around 16% of respondents aged over 40 reported said they were planning to gift money during the next three years, with children the most likely recipients (8%), followed by grandchildren (3%) and charities or others (2%).
Taking sensible tax steps
The rules and restrictions surrounding aspects of IHT, such as gifting and using allowances can be difficult to navigate. With more and more people facing unexpected IHT bills, seeking professional financial advice can be highly beneficial in terms of ensuring you plan effectively to mitigate unnecessary costs.
It’s important to ensure you are in the best place possible when it comes to IHT planning. Sensible tax planning can help to reduce the amount of tax you pay and safeguard your wealth for the future. We can help – please get in touch.
Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from taxation, are subject to change. The Financial Conduct Authority does not regulate tax planning.
1 Interactive Investor