Will your Estate Pay Inheritance Tax?

The Institute for Fiscal Studies says the number of estates which will be liable to pay Inheritance Tax (“IHT”) will increase by nearly 400% so that in four years time one in ten estates will pay it.

Currently IHT brings the Chancellor of the Exchequer c.£3.5 billion a year. However, according to the Office for Budget Responsibility, the amount of IHT paid will increase in four year’s time to £5.8 billion.

The Inheritance Tax threshold or “Nil Rate Band” is the value of an estate before IHT becomes payable. The current Nil Rate Band is £325,000 which was set in 2009 – that’s about the average price of a detached house in Wells or Frome.

If the value of an estate (including any assets held in trust and gifts made within seven years of death) is more than the Nil Rate Band then IHT will be payable. This is currently set at a rate of 40%.

With the introduction of the “Transferable Nil Rate Band” between married couples and civil partners in 2007 the number of estates paying IHT fell. As property prices also decreased many estates avoided IHT. However, as house prices are set to continue to rise and the Nil Rate Band has been frozen at its 2009 level for the next four years, many more families are now more likely to be caught by the IHT net.

Planning your estate allows you to consider whether IHT is likely to be payable and if there are reliefs and exemptions which may be available to reduce the IHT liability. Having a Will and reviewing it regularly can ensure that your estate is tax efficient. In addition, it will also ensure that your loved ones know how you would like your estate administered.

At Harris + Harris we aim to help you make the right decisions, at the right time. We have experienced solicitors in both our Wells and Frome offices who can make sure your Will has the effect you intend, and that Inheritance Tax is minimised.

For more analysis of the anticipated increase of estates paying IHT see: Middle class families braced for inheritance tax time bomb

Contact Joshua Eva in Wells or Caroline Fletcher in Frome.