Inheritance tax receipts are up £0.5bn on the same time as last year (April to July) according to HMRC. The total receipts were in the region of £2bn. Could these higher receipts be due to the higher mortality during the early months of the COVID-19 pandemic? Quite possibly.
In late 2020, early 2021 we saw the rate of mortality increase due to Covid-19*. IHT receipts increased circa 6 months after the highest rates of death due to Covid-19 were recorded. There is clearly a delay between someone passing and the estate being settled. The Co-op** estimate that estates can be settled within 6 months if there are no complicating factors. There is, however, insufficient data at this point to state there is a direct causal link between the two but it seems quite likely.
What are your views on inheritance tax planning?
Views on inheritance tax planning often sit in one of two camps. Many take the view that they have worked all their life, paid their dues and do not wish to be further penalised on death. Others do their best to spend what they have during their lifetime and are less concerned about further taxes. Everyones views are different – in a recent article in the Guardian, Daniel Craig said that he would not be leaving all his fortune to his children, remarking that “inheritance is distasteful”.
The media are suggesting that inheritance tax may be targeted by the government to increase revenue to help service the current deficit. We do know that the government like a fiscal drag policy, the IHT nil rate band and the pensions lifetime allowance have both been frozen until 2026.
So, how do you plan for inheritance tax?
Many of our clients are unsure when best to start addressing the issue of IHT planning. Whilst working you build for your retirement, once reached it is often difficult to know how much you will need. Some are reluctant to part with substantial amounts of money, living in fear of the costs involved with nursing care fees in their old age – with fees typically sitting at a staggering £600 – £1200 per week! Few wish that burden to sit with their children if indeed they could afford it. It looks as though the new National Insurance increase may go some way to alleviating some of the pressures, but there is a lot of detail to work through.
There are a number of small steps that can have a powerful cumulative impact on your IHT over the years. One of the less used allowances is “gifting out of income”. We have used this to help build ISA and pension portfolios for our client’s children/grandchildren, thus slowing down the growth of their own estate and successfully moving it down the generations.
We often suggest putting a life assurance policy in place, and if written in trust can be used to help mitigate any potential IHT liability. These life assurance policies have contracts that allow you to retain control of your assets but are IHT friendly after only two years.
If inheritance tax planning is something that does concern your family, and you wish to put some plans in place, talk to your Legal & Medical Adviser who can help devise solutions that are appropriate to you and your family.
Do you plan to pass some of your wealth on to your family? Let us know by adding a comment below