Inheritance Tax Nets £5 Billion
Over the last 12 months, HMRC has collected over £5 billion in inheritance tax. Inheritance tax has never reached this record level in one year before, and the level for this most recent period is 19 percent higher than in the previous year.
Why is this? Why is so much more money being paid in inheritance tax?
The first reason is that although the IHT allowance has been frozen at £325,000 for a number of years now, house prices have continued to rise. This means that more estates than ever are worth more than the allowance. However, this should be combated thanks to the new nil-rate tax band (essentially allowing the estate an extra £100,000 grace if it is being left to a descendent) which came in in April 2017.
There are a number of other ways to reduce your IHT liability. One is to give away your assets so that they are not part of your estate when you die. You can make one gift per year that is worth £3000. Any more than that and inheritance tax will be due. You can choose to make that gift in one lump sum, or you can split it into bundles of £250 at a time. You cannot choose to give small £250 gifts as well as the £3000 gift to the same person, however.
Special dispensation is given for wedding gifts. You can give as much as £5000 to each of your children. The amount reduces to £2500 for grandchildren, and for anyone else it is £1000. Also, if you use your money to support a child in full time education, there will be no IHT due.
It is possible to make other transfers and gifts, but not everything will automatically be exempt – some will have the caveat that you need to live for at least seven years after the gift is given. If you do not, then IHT may be due when you do die.