Estate planning update

HM Revenue & Customs (HMRC) published its annual statistics on Inheritance Tax (IHT) in late July, revealing that IHT payments in the 2020-21 tax year totalled £5.4bn, up around £0.2bn (almost 4%) on the previous year, when receipts were slightly lower than 2018-19. Typically, more than 20,000 deceased estates a year are subject to an IHT charge.

The figures reveal that there has been a reduction in the number of estates affected in recent years, which HMRC believes is due to the phased introduction of the residence nil-rate band, which can allow the estates of married couples and civil partners to receive a total £1m nil-rate IHT band. A transferable nil-rate also assists this outcome, as it is possible to transfer any unused IHT allowance on death to a surviving spouse.

Estate planning can help to keep an estate out of the clutches of IHT or at least reduce the amount of tax payable, by taking simple steps such as making lifetime gifts, through to more complex trust arrangements. It is a specialist area, particularly with the possibility of a revised IHT regime being introduced, so professional input is advisable.

The value of investments and income from them may go down. You may not get back the original amount invested. Inheritance Tax Planning is not regulated by the Financial Conduct Authority.