Inheritance Tax – Choose Wealth not Stealth

By Simon Cross, Partner & Notary Public

What were you doing in 2006? It’s a while ago now, but that was when the Government announced that a husband and wife could have transferable Inheritance Tax allowances. This figure was based on the basic Nil Rate Band allowance of £325,000 from 2009, an increase that year from £312,000. The allowance was transferable between spouses. A surviving spouse would therefore have £650,000 of inheritance tax allowances from 2009. Happy days!

The big news though was made in 2017 with the introduction of a Residence Nil Rate Band. That allowance was worth an extra £350,000 between a couple. Sadly, the allowance has strict conditions. Not everyone can claim it.

I wonder what your property was worth in 2006? I wonder what your investments were worth? The downturn in 2008 was just around the corner, but despite that short term blip, properties and investments have significantly improved in value.

Not even Covid has halted the relentless rise in these asset classes, both of which we associate with personal wealth.

In the meantime, however, what has happened to those much-celebrated Inheritance Tax allowances? In the 15 years that have passed, the Nil Rate Band allowances have been frozen. No increase at all. Indeed, last year the Government announced that those allowances will remain frozen until 2025. What does that mean to you? It means that the Government’s tax take in relation to Inheritance Tax has soared and will continue to do so until at least 2025, when they might improve those allowances.

A stealth tax is one that is not announced. It sneaks up on you.

Improvements in your investment values and improvements in property prices are adding to the Government’s take from your Wealth. The rate of tax is a swinging 40%!

Your wealth that has suffered during your life from the ravages of Income Tax, Stamp Duty Land Tax, Capital Gains Tax and National Insurance. Inheritance tax is no respect or of what you have paid. It’s all about net value.

Why then is this stealth tax, once called a voluntary tax, so much of a winner for the Government?

The simple reason and answer to that, is because people are lethargic and rarely seek advice as to how to mitigate this stealth tax. Some fear expensive solutions and convoluted schemes of arrangement. It doesn’t have to be that way!

For clear, no-nonsense advice at a reasonable price, seek professional advice from Humphries Kirk’s Private Client Team. We are here to help and we will guide you through the various options that are open to you in order to mitigate this stealth tax.

Choose wealth or stealth.

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