Inheritance Tax – a problem that is not going away!
24 October 2016
Death Duty was first introduced as a tax on estates in England and Wales over a certain value from 1796, then called legacy, succession and estate duties. Whilst there have been a number of changes in name, scope and value some form of inheritance tax has been in existence for 220years.
For a significant part of that time period this particular tax would have been viewed primarily as a tax on only the wealthy in society. In fact this was always put forth as a justification for the tax. That notion though has been changing fundamentally over the course of the last number of years.
The United Kingdom as we know it is somewhat different to the United Kingdom in 1796 and inheritance tax planning is no longer only a consideration for the wealthy of our society. With the nil rate band having been frozen at £325,000 since 2009 and the general increase of personal wealth more people are finding themselves with an estate over the inheritance tax threshold.
To put this into perspective in 2013-14 267,549 grants of representation were extracted which accounts for approximately 49% of all deaths in the United Kingdom. Of these, 19,277 were liable to an inheritance tax charge. The Revenue collected £4,6 billion in inheritance tax in 2015-16.
According to NFU Mutual there could be a rise to almost 500,000 millionaires in the United Kingdom this year. With the general increase in personal wealth combined with these figures the Revenue is set to take an ever greater proportion of people’s estates. NFU Mutual found the number of millionaires in the United Kingdom has increased by 27% between 2008 and 2013.
The Revenue are anticipating a significant increase in the inheritance tax take in the next few years and furthermore that the Revenue view it as a convenient and relatively straightforward tax to collect given that it is returned to them by the personal reps of an estate following a death.
As a Private Client Solicitor it still surprises me that 27million adults in the UK do not have a will. Many people who have created a will do not review their wills, meaning that their wills may be out of date and may not be as effective as at the time they were drafted. On a very basic level a will is important as it allows you to set out your wishes including the appointment of guardians for infant children or leaving a legacy to a niece, nephew or specific charity, which would not otherwise have benefited. A will can also provide family members with a level of comfort knowing that their loved ones wishes have been carried out.
However and importantly and especially if done in the context of a broader estate planning exercise, a carefully drafted will can allow you to potentially mitigate the inheritance tax liability which might otherwise arise on death. It is then possible to review a will in the light of changing personal and financial circumstances.
Our firm’s private client team specialises in providing estate planning advice. Should this be of interest to you, please contact Neil Bleakley, Fiona Wallace or Stephanie Johnston.