Analysis of the latest Inheritance Tax (IHT) figures produced by HM Revenue & Customs (HMRC) has revealed that more than £30 million was saved last year thanks to gifting.
According to the latest IHT receipts received by HMRC in the 2020-21 tax year, over £5.4 billion of IHT was paid by taxpayers.
This is an increase of £190 million or four per cent on the figures from the 2019-20 tax year, with estimates from the Office of Budget Responsibility suggesting that the nation’s IHT bill may hit a record high of £6 billion next year.
IHT receipts continue to rise year on year, despite the Government extending the residence nil-rate band over the last half a decade to allow a couple to pass on up to £1 million to direct family members.
The continuing upward trajectory of IHT bills is thought mainly to be the result of rising house prices, which have seen a further boost this year thanks to the stamp duty holiday.
Despite the amount of IHT being collected, a study of the latest data shows that more people are making use of gifting to reduce their bill, in particular, the annual gift allowance that allows taxpayers to give £3,000 each year without incurring IHT liabilities.
However, despite the benefits it offers, some within the accountancy profession feel the allowance should be increased to represent inflation since its introduction in the early 1980s.
Estimates suggest that if this was taken into account the allowance should be worth up to nearly £12,000 – four times as much as the current amount.
If you would like tax advice on making gifts to family and friends, please contact your Seymour Taylor representative today or email enquiries@stca.co.uk or call 01494552100.
This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at the time of publishing 28 September 2021.