Media Centre

Tuesday 21st August 2018 - Last update: June 6th, 2018.

HMRC Inheritance Tax Revenue up to £5.2 billion for 2017/18

May 8, 2018

Author:

Type: Advice for Businesses, Advice for Individuals, Dental Blogs, Financial Planning, Latest Blogs, Medical Blogs, Pharmacy Blogs, Trending

HMRC kindly collected £400 million more in inheritance tax (IHT) in 2017/18 than the previous tax year; an increase of 8%.

 

 

Whilst IHT receipts have been increasing year on year for at least 8 years, there was an expectation that this would be somewhat curbed in 2017/18 by the introduction of the “Main Residence Nil Rate Band”.

 

 

Every individual has a standard inheritance tax ‘Nil Rate Band’ (NRB) totalling £325,000. A married couple can therefore effectively leave £650,000 without deduction of IHT to the next generation. Any amount above this would be subject to 40% taxation.

 

 

In his July 2015 budget, however, George Osborne introduced an additional ‘residence nil rate band’ (RNRB), which started at £100,000 per individual in April 2017. This allowance permits homeowners to pass additional wealth to direct descendants without taxation; the aim of the allowance being to curb IHT duties (particularly for families in the south east with soaring London property prices).

 

 

For 2017/18, the total combined allowance (the standard NRB plus RNRB) that a married couple could pass to the next generation was therefore £850,000 (up £200,000 from the previous year). This is set to increase to £1,000,000 by 2020; at which point the RNRB should be £175,00 each.

 

 

So why, despite this additional nil rate band, did IHT revenue for 2017/18 increase by £400 million?

 

 

From a freedom of information request from advice firm NFU Mutual to HMRC, it seems the data obtained reflects that only 1 in 6 estates benefited from the extra allowance in 2017/18. This may be because, in certain circumstances, the allowance is not available or reduced.

 

 

One example of this is where the deceased does not have any children or grandchildren (natural, adopted or fostered), or there is no spouse/civil partner of a lineal descendant. In such an instance, the RNRB is not available, as the main residence can only be passed to direct descendants (or their marital partners).

 

 

Alternatively, if the total estate is in excess of £2 million, then the additional allowance is tapered down.

 

 

The last potential reason is that the deceased prior to their death simply did not know about the allowance and take appropriate action to benefit from it (after all, 1 in 6 is a very low number).

 

 

As previously mentioned, Willing your main residence to anyone other than your direct descendants (or spouses/civil partners of lineal descendants) would forgo the allowance. For example, many individuals have old historic Wills in force, bequesting property into trust which could potentially result in loss of the additional RNRB.

 

 

The complexity of IHT rules may have played a part in individuals not making use of the allowance, and Philip Hammond’s recent request for a review of IHT system gives further credence to this issue.

 

 

There are many ways to reduce overall estate liabilities, such as lifetime gifts, business property relief, EIS investments and AIM investments. The rules are extremely complex, and financial advice is strongly suggested, in conjunction with seeking advice from solicitors.

 

If you would like to discuss retirement planning in more detail, or you would like to speak with a member of our team, please contact Lee Salter or call 01772 821021 to be put in contact with a member of our Financial Planning team.

ремонт в квартире

steroid-pharm.com

surrogacycmc.com

Did you enjoy this blog?

Click here to sign up to our Newswire to get these sent directly to your inbox!