Inheritance tax receipts increased by £100 million in July compared to the same period last year, reaching £3.2 billion.
Although growth has slowed in recent months, the receipts indicate a longer-term trend that “remains firmly upwards”, Quilter’s tax and financial planning expert Shaun Moore said.
“Frozen thresholds, rising property values and growing asset wealth continue to pull more families into the scope of inheritance tax, often without them realising”, he explained.
“With the budget drawing near, wealth taxes are likely to attract increasing attention as the government looks at how best to balance the books. However, any significant changes would need to be carefully balanced against the government’s wider economic priorities.”
Corrinne Emmett, senior business development manager at global wealth advisers Zedra, reiterated the message that IHT planning is no longer just for the wealthy.
“When considering IHT and estate planning, it is essential to take a holistic and forward-looking approach; balancing tax-efficiency with financial security and long-term needs, such as funding for care”, she advised.
“Advice from a suitably qualified professional is crucial in navigating this increasingly complex landscape”, she added.
“With the rules evolving and thresholds remaining static, IHT planning is no longer just for those with very large estates. Taking advice early and reviewing arrangements regularly can make a significant difference in preserving wealth and achieving long-term objectives.”
Despite the slowdown, Ian Dyall, head of estate planning at wealth management firm Evelyn Partners, warned advisers not to become complacent about the reach of IHT.
“We have not yet seen the effects of the restrictions to agricultural property and business reliefs that came in this April”, he pointed out.
When the scope of IHT increases next April, beneficiaries of those aged 75 and over will be particularly vulnerable, he added.
“The beneficiaries of those older than 75 are at risk of a super-sized tax burden from next April as they could also pay income tax at their marginal rate when they withdraw funds from the pension, after it’s already been depleted by IHT. That could mean they end up with not much more than a third of the value of the pension left by the saver.
‘Moreover, an ageing population will drive a rise in IHT liabilities in the coming years, as the wealthy boomer generation enters late life, with the OBR recently forecasting that receipts will rise to 1.4% of GDP by 2030/1.
“That is of course unless people take some action to mitigate an unnecessary tax burden on the estate at death. That could take the form of lifetime gifting or even just spending it on themselves – and possibly leaving other assets for loved ones, such as property.
“The very useful ‘normal expenditure out of income’ exemption can be put to work with sufficient foresight and care, and many families are looking towards whole of life policies, which can be funded from pensions and written into trust so that they pay outside of the estate an amount that covers the expected remaining IHT bill.
“The spousal exemption becomes even more valuable after next April, as it is pretty much the only way to ensure a bequeathed pension will not be subject to IHT, on the first death at least. That means not just that pension savers should check their beneficiary nominations, as many will have put down their children under the current regime, a choice that might need rethinking.
“But also that elderly, long-term cohabiting partners with significant pensions might consider getting married for a big tax saving on the first death – as was widely covered in the media this week after Ricky Gervais revealed he is considering marrying his long-term partner for this very reason.”
