Inheritance tax paid by families has more than doubled in a decade.
Total receipts from inheritance tax have increased from £2.7 billion in 2010 to £5.4 billion, according to a recent review of Treasury documents. The Treasury is forecast to increase that to £7.6 billion a year by 2027.
Inheritance tax was once considered a tax on the very wealthiest in society, but this is far from the case now.
House price growth and asset price inflation over the past decade, combined with a nil rate band frozen since 2009, has resulted in more and more estates paying inheritance tax. The numbers of people and their families exposed to this tax will increase dramatically from now on.
When to start planning?
When you are in your 60s, seven years can rush by without a second thought but when you are in your late-70s and 80s, seven years can feel like an eternity. For inheritance tax planning, seven years is the magic number of years you must survive if you want to gift assets to your children and not pay inheritance tax on the gifted value.
Rather than taking a major risk with being able to survive seven years, it is therefore sensible to gift when you are in your 60s and early 70s or even earlier.
Given that the average person in the UK will live until they are 81 and there are strict rules around how much cash can be given as gifts and how much can be put into a trust without incurring charges, many people have simply not left themselves the time needed to make a real difference.
The UK inheritance tax legislation is deliberately drafted to limit people’s ability to mitigate inheritance tax during the last few years of their life!
It is a fact!!!