Today (April 5) marks the end of the 2021/2022 tax year, with tomorrow (April 6) starting the new financial period. The most recent IHT statistics
Today (April 5) marks the end of the 2021/2022 tax year, with tomorrow (April 6) starting the new financial period. The most recent IHT statistics found that tax receipts hit a record high of £5.36billion for the period between April 2021 and February 2022. This is a notable rise from the previous record high seen in the 2018/19 tax year of £5.36billion and is £700million higher than the same period last year. Upon releasing the figures, HM Revenue and Customs (HMRC) noted that the increase in inheritance tax receipts could be partially attributed to the higher volume of wealth transfers that took place during the pandemic.
However, the tax body said this cannot be verified fully until the administrative data become readily available for scrutiny and analysis.
On top of this, while the IHT threshold remains frozen at £325,000, the value of many estates has only grown in value.
As a result more families are being pushed into paying inheritance tax and experts worry that many continue into the new tax year.
A recent Freedom of Information (FoI) request, conducted by financial firm Continuum, exposed that residential properties in the UK make up one-third of the value of assets held by estates which are potentially liable for inheritance tax.
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Martin Brown, a managing partner at Continuum, believes there is a very good chance we will see IHT receipts rise once the last tax year’s statistics come out.
The financial expert cited the number of wealth transfers as being a potential factor in how inheritance tax will hit everyday families.
Speaking about the tax year’s end, Mr Brown said: “Whilst we all hope that the number of wealth transfers will begin to drop as the coronavirus pandemic enters a less deadly phase, for the remainder of the tax year we are likely to continue to see a high number of transfers.
“The high volumes of transfers combined with continuing rises in property values and more estates becoming liable to inheritance tax due to the freeze of IHT thresholds means we are very likely to see IHT receipts hit even bigger highs before the end of the tax year.
“The coronavirus pandemic has left clients thinking about their vulnerability and perhaps also a little more open to discussing estate planning with their family.”
Before the start of the new tax year, experts are also sharing how the public can reduce the risk of any potential inheritance tax bills, with many discussing the benefits of gifts.
Adrian Lowery, a personal finance expert at investing platform Bestinvest, explained: “There are many ways to mitigate or eliminate an IHT liability, including life-time gifting, maximising pensions which can be passed on tax efficiently and investing in assets that will attract Business Relief.
“It is, however, vital to plan ahead. There are a number of tax-free financial gifts that you can make each year. These leave your estate immediately so there won’t be any inheritance tax to pay.”
Examples of inheritance tax-saving measures include making gifts to spouses or partners if their home is in the UK.
Upwards of £3,000 in gifts can be awarded every tax year and this can be carried onto the following tax year, giving families a total of £6,000 in potential savings.
Alternatively, an unlimited amount of IHT gifts can be made of up to £250 per person. Furthermore, wedding gifts to a child of up to £5,000, to a grandchild or great-grandchild of up to £2,500 or to anybody else of up to £1,000 can also be made.
It should be noted that lifetime gifts can be possibly exempt from an estate for IHT purposes, if the person lives seven years or longer after making it.