There have been several changes to inheritance tax rules in recent years, which can make it difficult to understand how you and your family might be affected in the future. This guide looks at the current rules and how you can be prepared.
Changing rules
Higher property values, an inheritance tax charge and frozen thresholds has meant that more people are falling into the net of inheritance tax than ever before. In fact, in the 2022-23 tax year, 4.62% of all deaths in the UK resulted in an inheritance tax charge – an increase on the previous year.
In last year’s Autumn budget, the chancellor extended the £325,000 nil-rate band and the £175,000 residence nil-rate band, which means higher property values take more homeowners into the tax band. On top of that, from 2027, a lot of pensions will also be taken into account.
Inheritance tax planning
There are ways to mitigate against inheritance tax, to ensure your loved ones benefit as much as possible. This can include gifts made to them while you are still alive, whether that’s regular or small gifts. Most people are allowed to give away £3,000 tax free each year.
As the rules are complicated, hiring an expert is valuable and if you are looking for accountants Bath to help, there are many firms such as https://chippendaleandclark.com/accountants-near-me/bath.
Top tips
Most financial planners advise that keeping clear and up-to-date records of any gifts is key, as is reviewing how much you can afford to give without any negative effect on your own long-term security.