Advice opportunity as IHT receipts to reach £6.5bn

Advice opportunity as IHT receipts to reach £6.5bn

Inheritance tax receipts will continue to grow in the coming years despite measures to cut people's bills, opening up further opportunities for tax advisers.

Documents released alongside today's (22 November) Budget showed the amount of money collected through inheritance tax will pass £5bn for the first time this year.

HM Treasury predicts it will raise £5.3bn in 2017 to 2018, which will eventually increase to £6.5bn by 2022 to 2023.

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Les Cameron, tax expert at Prudential, said: “Inheritance tax planning will continue to be a booming area of financial advice.

"Government estimates show the trend of rising inheritance tax receipts has continued.

"We’ve breached £5bn for the first time and they will hit £6.5bn in 2022 and this should only increase consumers’ demand for inheritance tax planning.

"We should also remember the £3,000 gifting allowance has been frozen for over three decades so the earlier you start using it the more wealth you can pass on to your family."

He said the key thing to remember with inheritance tax planning was to make sure there was the right blend of access and control over the money.

In 2016 to 2017 inheritance tax receipts were £4.84bn – 4 per cent greater than the previous year and the highest level since the current system was introduced in 1986.

HM Revenue & Customs has said this increase has primarily been driven by rising asset values, with residential property making up around a third of the total value of taxpaying estates.

As the average value of estates rises, an increasing number of estates are now valued over the inheritance tax nil rate band, which has been frozen at £325,000 since April 2009.

The continuing increase in inheritance tax receipts comes despite plans by HM Treasury to exempt people's family homes from it.

Since April 2017 there has been a £100,000 nil rate band when a residence is passed on death to a direct descendant.

This will gradually increase to £175,000 by 2020 to 2021 and from then on it will increase in line with CPI inflation.

Together with the inheritance tax nil-rate band and the ability to transfer unused main residence nil-rate band to a surviving spouse or civil partner, this allowed the government to claim there will be an effective inheritance tax threshold of £1m in 2020 to 2021.

But despite this inheritance tax receipts will increase by more than £1bn in the next five years.