Many of our clients assume they are not affected by Inheritance tax (IHT) because, they think, their estate isn’t worth enough to be subject to this tax.
But are you sure? It’s worth considering this issue very carefully because your loved ones could lose out to the taxman on 40% of a large chunk of your estate.
A number of factors mean that more and more people will be paying IHT on their estate in the coming years:
- Your general nil rate band (GNRB) has not increased for 10 years (since 2010/11), remaining at £325,000. The chancellor has just frozen it at this level at least until 2026. Inflation means that more and more estates will exceed in value the GNRB as we move closer to 2026.
- The residence nil rate band (RNRB, introduced in 2017) is currently £175,000 and was due to rise with inflation. This allowance is available to you if you leave your home to your descendants (ie children or grandchildren). But this too has now been frozen until 2026.
- Property prices in many areas have risen sharply in the past 12 months, meaning the value of your property is more likely to exceed the value of your RNRB.
- At best, therefore, you have IHT allowances of £500,000 to offset against the value of your estate. Any value in your estate over and above this amount is likely to end up incurring IHT at 40%.
As well as using lifetime gifts to reduce your exposure to IHT, carefully drafted wills and estate planning can also reduce your exposure to it and increase the amount that ultimately passes to your descendants.
Why not contact us now to discuss this further. We can then arrange for you to draw up your first will and/or to replace your old will that is out of date. Your family (beneficiaries) may be forever grateful that you did!