The number of people being charged Inheritance Tax on gifts has been rising steadily, according to newly released figures.
The Financial Times reports that, after a Freedom of Information request, HMRC revealed that growing numbers of estates have become liable for IHT on gifts. In 2015/16 a total of 873 estates were liable. The following year, that number grew to 920 and then reached 993 for 2017/18. The total tax charged rose from £135m in 2015/16 to £156m in 2016/17 and then £197m in 2017/18.
Inheritance Tax is charged on estates worth £325,000 or more. This threshold has remained static since 2009, meaning a growing number of estates are getting caught in the IHT net. Gloomily, the Office of Budget Responsibility (OBR) has forecast that the number of estates subject to Inheritance Tax will rise because of the coronavirus pandemic. The OBR figures predict a rise of 25,200 affected estates in 2019/20 to 30,400 in 2020/21.
Inheritance Tax on gifts – it’s time to plan
Given such an outlook, it’s more important that ever that you start your Inheritance Tax planning as soon as possible. It’s also essential you get good advice. For example, if you gift certain assets during your lifetime, they can be excluded from IHT. The catch is that you have to live for at least seven years afterwards. Other gifts can be made tax-free as well, including gifts to spouses. However, you really must get advice that’s tailored to your overall financial situation.
Inheritance Tax can be complex, so it’s little wonder that a growing number of beneficiaries are paying the tax on gifts. It’s highly likely that a good number of people whose estates were subject to IHT were unaware of the allowances and exemptions open to them.
So, if you want to avoid making gifts to family and friends that could land them with an IHT bill a few years down the line, get in touch. Our Inheritance Tax specialists would be very happy to advise you.