Muddy waters swirl around IHT

In late July, HM Revenue & Customs (HMRC) published its annual statistics on Inheritance  Tax (IHT). These revealed that IHT payments received by HMRC in the 2020-21 tax year totalled £5.4bn, up about £0.2bn (almost 4%) on 2019–20, when receipts were slightly lower than 2018–19. Typically, more than 20,000 deaths per year result in an IHT charge.

The stats show that recent years have seen some reductions in the number of estates affected, which HMRC believes is due to the phased introduction of the residence nil-rate band, which can allow married couples and civil partners up to £1m free of IHT. A transferable nil-rate band assists this outcome by enabling the transfer of unused IHT allowance upon death to a surviving spouse.

There are steps that can be taken to keep an estate out of range of IHT, or at least reduce any IHT due upon death; these include simple lifetime gifts through to more complex trust arrangements. Estate planning is a specialist area and, with the added possibility of a revised IHT regime soon, professional input is advisable.

It is important to take professional advice before making any decision relating to your personal finances. Information within this newsletter is based on our current understanding of taxation and can be subject to change in future. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK; please ask for details. We cannot assume legal liability for any errors or omissions it might contain. Levels and bases of, and reliefs from, taxation are those currently applying or proposed and are subject to change; their value depends on the individual circumstances of the investor.

The value of investments can go down as well as up and you may not get back the full amount you invested. The past is not a guide to future performance and past performance may not necessarily be repeated. If you withdraw from an investment in the early years, you may not get back the full amount you invested. Changes in the rates of exchange may have an adverse effect on the value or price of an investment in sterling terms if it is denominated in a foreign currency. Taxation depends on individual circumstances as well as tax law and HMRC practice which can change.

The information contained within this newsletter is for information only purposes and does not constitute financial advice. The purpose of this newsletter is to provide technical and general guidance and should not be interpreted as a personal recommendation or advice.

The Financial Conduct Authority does not regulate advice on deposit accounts and some forms of tax advice.

Triple lock changes for 2022–23

After much speculation, in September, the Secretary of State for Work and Pensions, confirmed suspension of the average earnings component of the pension triple lock, to avoid a disproportionate rise of the State Pension following the pandemic. For the 2022-23 tax year only, the new and basic State Pension will increase by the higher of either 2.5% or the consumer rate of inflation.