The increase in inheritance tax revenue in the six months ended October 31 shows that individuals are not seeking appropriate advice, said Andrew Aldridge, partner at Deepbridge Capital.
Inheritance tax revenues were £ 3.6 billion from April to October this year, an increase of £ 600 million over the same period in 2020.
Aldridge said, “It shows how easy it is for individuals and couples to generate potentially high inheritance taxes after their death, even though they are not what they consider ‘wealthy’.
“Although a majority of financial advisors tell us that inheritance tax is a priority aspect of financial planning, these latest figures clearly show that many people are still not seeking advice that can enable them to pass more of their wealth on to their families. “
HMRC said the higher revenues recorded between March and August this year were due to higher volumes of capital transfers during the Covid-19 pandemic, although they could not verify until full administrative data is available.
Shaun Moore, tax and financial planning expert at Quilter, said the “emerging” housing market is likely to be contributing to the surge in revenue, but there are ways to reduce the tax burden.
Real estate prices have risen continuously over the past year. The average UK house price was £ 264,000 in August, up £ 25,000 from a year ago, according to the Office for National Statistics House Price Index.
Moore said, “This tax year you can give away £ 175,000 of your assets tax-free, which when combined with your spouse’s or domestic partner’s allowance, effectively doubles to £ 350,000.
“That is on top of your inheritance tax allowance – or zero rate – of £ 325,000, which means it is possible for a couple to pass on £ 1 million inheritance-free.
“However, this works for those with direct descendants who inherit the family home, while the UK’s six million domestic partners are less fortunate and unable to claim the combined allowances.”
He added there are other ways to reduce the IHT tax burden, including the ability to give family members potentially exempt transfers (pets) or paid lifelong transfers (CLTs), but these take seven years to see the benefit.
Andrew Gillett, director of wealth management advisory at BRI Wealth Management, agreed that planning ahead is the most important thing.
“It is important that families do not miss this tax and seek advice in good time to ensure effective planning.”