Sajid Javid has suggested that he is considering Inheritance Tax (IHT) reform, admitting at the recent Conservative Party Conference that it is ‘on his mind’.
The Chancellor made the admission before Robert Jenrick, the Housing Secretary, described the tax as “fundamentally unfair”.
According to the latest figures released by HM Revenue & Customs (HMRC), the number of estates paying IHT has risen sharply, with 28,100 estates paying the tax in 2016-17, which is a 15 per cent rise on the 24,500 that paid the tax the year before.
The news follows a recent study by HMRC that found that just 45 per cent of those who are gifting assets and large sums of money via inheritance understand IHT rules.
There is usually no IHT to pay if either the value of your estate is below the £325,000 threshold, or if you leave anything above the £325,000 threshold to your spouse, civil partner, a charity or community amateur sports club.
If you give your home to your children (includes adopted, foster and stepchildren) or grandchildren, the threshold can increase to £475,000.
If you are married or in a civil partnership and your estate is below the threshold, any unused threshold can be added to your partner’s threshold when you die. This means it can potentially be £650,000 or up to £950,000.
The standard rate of IHT is 40 per cent, which is only charged on the part of your estate that is above the threshold.
There are a variety of tax-free allowances for making gifts, including the annual £3,000 exemption, while any unused allowance from the previous year can be used.
With the Government considering reviewing IHT, it’s important to seek expert advice. Preparing a Will can be a complex process, and being aware of the IHT rules is pivotal, as well as exploring your options to ensure your estate is set up in the most tax-efficient manner.
Priti Shah, Partner at OGR Stock Denton, said: “The Inheritance Tax rules are complicated. It is very important to take professional advice before undertaking any estate planning to ensure you take the correct steps and in the right order to maximise the use of all available allowances and reliefs.”
For advice on matters relating to Inheritance Tax and Estate Planning, contact our expert team today.