3. The inheritance tax (IHT) problem is still getting worse
None of us like the thought that when we pass away, tens or hundreds of thousands in tax could be taken out of our estate. Wouldn’t it be better for that money to go to the family?
And many people will have been reassured by George Osborne’s announcement in the Summer Budget that £1 million can be left to your relatives without IHT being applied.
But as the government figures released with the Autumn Statement show, the expected receipts from IHT are expected to rise. So is this £1 million all that it’s cracked up to be?
The facts are as follows:
- Anything above the nil rate band of £325,000 is taxed at 40%
- If you are a married couple or civil partners, it doubles up to £650,000
- From 2017, there is an additional residence nil rate band of up to £100,000 per person
- This increases up to £175,000 per person in 2020
- Obviously, this only applies if you own a property and the value net of equity release and mortgages that applies
- It is only available if you leave the property to a close relative of yours
- If your estate is more than £2 million, the additional amount is taken back again bit-by-bit
Of course, if you do have a £1 million estate, by the time you get to 2020 you might find that because of property prices increasing or investments growing in value your estate will be worth much more than £1 million and in the IHT net.
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