Inheritance Tax Thresholds

Finance in later life
by Skipton Financial Services

Could your loved ones be left facing a 40% Inheritance Tax bill?

There’s a misguided perception that only the very rich pay Inheritance Tax on their possessions and estate when they die. But existing threshold limits – which are in place until at least 2015 – mean that millions of ordinary people could be liable for such a tax bill, without even realising.

If the value of your estate (which includes property, cars, jewellery, savings and investments) is above the £325,000 threshold – or above £650,000 if married or in a civil partnership – your loved ones could be left with a 40% tax bill on the amount above this threshold. What’s more, they’d have to pay it before they can inherit what you want them to have.

It means you might wish to consider taking steps to address your potential problem. Because if you do act now, there are ways of reducing or even eliminating your liability – while in many cases retaining full control of your estate.

Inheritance Tax thresholds aren’t changing anytime soon – and the Taxman’s income is on the increase

Back in 2007, the Conservatives pledged to increase Inheritance Tax thresholds to £1 million. Yet after coming into power in June 2010, it agreed a compromise with its new Coalition partners – the Liberal Democrats – to freeze the existing thresholds for at least five years. Even when we get to 2015, there are no guarantees that these thresholds will then be raised.

In the meantime, it appears an increasing number of people are falling into the Inheritance Tax trap. New research by UHT Hacker Young has found the Government’s Inheritance Tax income climbed by 14% in 2010/11^. For the year ending March 2011, Her Majesty’s Revenue & Customs (HMRC) collected a whopping £2.7bn from Inheritance Tax; up from £2.4bn in March 2010.

The problem is likely to get worse. It could be that your estate’s total value is currently below the threshold, but future price rises – especially to property – could push you over the limit during the next few years. For example, the Centre for Economics and Business Research has predicted house prices will increase by 14% over the next five years*.

Receive no-obligation financial advice

If you are unsure whether you might have an Inheritance Tax liability – or could in the future – Skipton Financial Services (SFS) offers a specialist Inheritance Tax Service. By undertaking a review with SFS, they will help you determine the value of your estate and – if you do have a liability – research a variety of options to reduce or even eliminate this problem.

There is no-obligation to act upon any advice they provide you, so you have nothing to lose from finding out whether they could help you remove this potential burden from your loved ones.

For more information and to book an appointment with an SFS Adviser, call 0800 145 6661 or click here.

Investments recommended by SFS as part of the Inheritance Tax Planning may not guarantee the return of your capital. The tax treatment of investments depends on your individual circumstances and may be subject to change in the future.

Skipton Financial Services Limited is authorised and regulated by the FSA under registration number 100013.

See the main Planning and Managing LaterLife Finance section for information on a wide variety of financial topics.

^ Source: http://www.ifaonline.co.uk/ifaonline/news/2133923/taxmans-iht-income-14-threshold-freeze
* Source: http://www.cebr.com/wp-content/uploads/FOR-EMBARGOED-RELEASE-Housing-press-release.pdf

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