HMRC have recently reported that they are expecting the revenue it receives from collecting Inheritance tax to increase to £3.3bn by the 2015-16 tax year. That’s up from £2.7bn in 2010-11. That’s more than a 20% increase in tax.
However, Inheritance Tax is largely a voluntary tax in many ways. As the former Labour MP once put it, Inheritance tax is “a voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue”. Whether you agree with the sentiments of Roy Jenkins or not, the facts are undeniable. More and more families will become affected by Inheritance tax in the years to come, unless we plan for it!
So here are the basic facts. The average Inheritance tax liability is about £130,000, so the solution is much more affordable than most people think. There are a number of options available to help reduce the effect of Inheritance tax, from arranging Life assurance to setting up trust funds. The first thing to do is calculate your Inheritance tax liability, which will show you the true cost of not planning.
It’s not necessary to become one of the increasing numbers of individual estates that have to experience the cost of an Inheritance tax bill.
Martin Dodd – Financial Advisor Wolverhampton