In the lead up to the election, there was much speculation about how each party would fund their plans. Labour made clear it was not looking at increasing income tax, but there were hints at changes to other taxes including Capital Gain Tax and Inheritance Tax. However, these hints were lacking in any detail.
Now, recently released figures show revenue from April to June 2024 have hit £2.1 billion in receipts of Inheritance Tax (IHT), being over £80 Millon higher than the same period last year. So why are revenues increasing?
Currently, each person’s estate has an exemption, known as the Nil Rate Band (NRB) that passes free of IHT. The NRB has remained at £325,000 since it was introduced by the then-Labour government in 2009. The Conservative Government introduced a further exemption, now at £175,000, in 2017. However, this was limited to homeowners leaving their home to direct descendants, so this is not available to everyone. The RNRB has not changed since 2021. This means neither the NRB nor the RNRB have been adjusted for inflation and increases in property prices for some years, meaning more and more estates are falling into the Inheritance Tax bracket where they might not have done in the past.
Other reliefs for IHT are Business Property Relief, primarily and broadly seen as beneficial for private business owners and shares in unlisted companies, and Agricultural Property Relief, seen to benefit the passing down of agricultural land.
Pensions are currently a popular way to pass down funds to family that have the benefit from falling outside of the IHT regime.
In light of the increased revenue and increasing numbers of estates falling liable, there are calls for Labour to reform this unpopular tax, bearing in mind they may also have plans for the revenue. To date there have been no details, but it is strongly considered that IHT will be in Labours sights. Keep an eye on our News & Insights at Hanne & Co for further analysis of Labour updates on exemptions, reliefs and pensions .
Estate & inheritance tax planning?
For more advice on your own estate management and inheritance tax planning, contact our friendly expert advisors at Hanne & Co. We are ready to answer your questions and advise on the best plans for you and your loved ones. Get help from our inheritance tax planning team today.
