Page 18 - ISO April 2023

INVESTMENT STRATEGY QUARTERLY

Inheritance Tax Planning

James Brooks, Deputy Head of Business Development, Raymond James Investment Services Ltd*

The government collected £6.1bn in Inheritance Tax (IHT) Please note these are simplified examples of what can be done
bills for the 2021-2022 financial year – a 14% increase on and if they are of interest, you are best advised to seek
professional advice.
the year before. With the banding frozen until 2028
following the 2022 Autumn budget, this will only continue MAKE A WILL
to move upwards. Start by making a Will. If an individual passes away without a

valid Will, their estate will be distributed following a specific set
According to the Office for Budget Responsibility, the tax
revenues will rise to £8.3bn by 2026. of guidelines which could in turn generate more of an Inher-
itance Tax liability, leaving less of the estate to loved ones.
The Chancellor, Jeremy Hunt, announced that IHT, which is
charged at 40% of a person’s estate above the tax-free allow- TAKE ADVANTAGE OF GIFT ALLOWANCES
ance (also known as the nil-rate band) of £325,000, will be This can be the easiest way to pass your assets onto your loved
frozen until 2028. This had already been frozen until April 2026 ones without paying tax. But there are some things to consider.
by Rishi Sunak when he was Chancellor. It is now nearly
fourteen years since there was a change to the core IHT There is no Inheritance Tax to pay on gifts between spouses or
allowance, having remained at the same level since 2009. civil partners. You can give them as much as you like during
your lifetime if they:
The Residence Nil Rate Band (RNRB) of £175,000 may be
available (in addition to the NRB) if you are passing your main • live in the UK permanently
residence to a direct descendent, such as a child or grandchild. • are legally married or in a civil partnership with you
The RNRB is reduced on estates worth over £2million and
tapers by £1 for every £2 of value by which an estate exceeds There is also no Inheritance Tax to pay on any gifts you give to
the taper threshold. If the RNRB has not been fully used on the political parties.
estate of the first to die of a married couple or civil partnership Anyone can give up to £3,000 of their assets or cash each tax year
the unused part can be transferred to the second estate.
without the amount becoming liable for IHT, no matter when they
die. If unused, it may be backdated one year to total £6,000.
BELOW ARE SEVEN WAYS THAT CAN HELP YOU
MINIMISE YOUR INHERITANCE TAX BILL Gifts of £5,000 to children made in advance of a wedding are also
Around one in twenty-five deaths results in an IHT liability, protected from IHT; for Grandchildren this amount is lower at
according to pension provider AJ Bell. Early planning can help £2,500.
reduce or remove this potential tax charged at 40%.

*An affiliate of Raymond James & Associates, Inc., and Raymond James Financial Services, Inc.

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