IHT payments set to double by 2030

01 May 2019

Inheritance tax receipts (IHT) are increasing every year, but many people could do more to reduce the amount of IHT due on their estates, according to Canada Life.

The pensions, investment and insurance firm said that the amount of IHT paid by UK families is set to reach £10bn per year by 2030, almost double the amount paid today. This increase is due to asset values growing while the nil rate band, or IHT threshold, remains frozen.

The IHT threshold is the amount up to which an estate has no IHT to pay. Since 2009 it has been set at £325,000, resulting in more people becoming liable for the tax each year.

IHT receipts have taken 30 years to reach the current level of around £5.1bn per year, but are now expected to take only another 10 years to reach £10bn, Canada Life said.

Yet research by the company has found that many estates are likely to end up paying more IHT than is necessary, with around 18% of estates worth up to £1m failing to put in place an inheritance tax plan.

Separate research by wealth management firm Charles Stanley suggests that up to 40% of all IHT paid -- an average of over £80,000 per estate eligible for IHT -- could be saved with the right advice to help navigate IHT rules.

Neil Jones, Market Development Manager at Canada Life, commented: "There's plenty that can be done within the existing rules to reduce an IHT bill. Perhaps because of a very British reluctance to discuss death, many people -- and sometimes their financial advisers -- won't bring up estate planning. As a consequence the Government is undoubtedly receiving tax that with proper planning wouldn't need to be paid.

"There are a wealth of solutions out there, like discounted gift trusts, which can reduce IHT while still enabling fixed, regular payments for people who are scared of 'giving it away too soon'. We'd urge people to consider meeting with a financial adviser. For a relatively small outlay, the rewards for future generations can be enormous."

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