The Government continue to press ahead with a review of taxes, which are certainly in need of simplification. One of our least favoured taxes is inheritance tax – which has been reduced for many in recent years with the introduction of a double nil-rate band for couples and a reasonable increase in the nil rate band itself (currently £325,000). However, combined with clever tax planning and falling property prices IHT does not raise a huge amount of tax and the current climate may well lead to changes. Personally I suspect that this is likely to be a case of smoke and mirrors – why get rid of a tax that does at least raise money? in practice it will probably appear to reduce by alterations to the nil rate band or rules themselves – but I wouldn’t bet your house on a change that means you end up inheriting more!
There are various tools available to reduce the impact of IHT, but please watch out for schemes that seem to do it all. The reality is often very different – most people need to retain control of their capital, which would contravene most IHT “plans” and HMRC guidance. Gifting the money or spending it are the two most basic and straight-forward ways to reduce your IHT. Not always possible, but many schemes that promise much tend to deliver little and are regularly reviewed by HMRC. This is not the time to hope that HMRC will adopt a “light touch”.
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