Despite rumours, the Inheritance Tax had no mention in this year’s Spring Budget, with many believing any cuts would be too costly for the government. Yet Inheritance Tax (IHT) casts a shadow over the UK, with HM Revenue and Customs (HMRC) reporting a staggering £5.7 billion in receipts between April and December 2023. This figure represents a significant £400 million increase compared to the same period the previous year, signalling a concerning trend experts believe will persist.
Caroline Allen & Joanne Baker, co-founders of Yorkshire Financial Planning, foresee challenges ahead for Yorkshire residents. Jo remarks, “We’ve experienced a notable uptick in enquiries over the past few weeks from clients keen to explore IHT implications, particularly amid speculations surrounding the spring budget.
“IHT is a deeply intricate and emotive issue. Advising individuals to plan sooner rather than later isn’t always sufficient. Instead, it’s advisable to devise a strategy during significant life milestones, such as nearing the end of mortgage payments or when children leave home. These junctures coincide with reduced living expenses and increased saving opportunities.”
Financial advisor, Joanne Baker comments: “Contrary to popular belief, Inheritance Tax’s impact extends beyond the wealthy elite. With property values steadily rising, an increasing number of Yorkshire homeowners find themselves leaving estates subject to significant taxes upon inheritance. This underscores the importance of proactive financial planning to safeguard assets and minimise tax liabilities for future generations.”
Transparent communication within families is crucial for estate planning. While discussions about inheritances and gifts may evoke strong emotions, addressing them promptly is advisable.
Jo continues: “Initiating conversations about plans and wishes early on can ensure intentions are clearly understood and accounted for. While parents may worry about appearing biassed, especially in large families with children at varying life stages, engaging a Financial Adviser can facilitate productive money-related discussions within the family unit. By fostering open dialogue, Yorkshire residents can mitigate misunderstandings and disputes, facilitating a smoother asset transition and minimising potential tax burdens for beneficiaries.”
“Understanding when tax payments come due is essential when navigating Inheritance Tax complexities. In the UK, IHT is typically payable on estates valued above the nil-rate band threshold, currently set at £325,000 per individual. Additionally, there’s a potential residence nil-rate band of up to £175,000 per person for residential properties passed to direct descendants, subject to specific criteria. Yorkshire residents must acquaint themselves with these thresholds and plan accordingly to manage tax liabilities effectively.”
Caroline adds: “Deciding when and what to give can be daunting, requiring careful consideration of individual circumstances and tax implications. Seeking guidance from Financial Advisers can provide invaluable assistance in navigating this complex terrain. By leveraging various allowances and exemptions, Yorkshire residents can optimise estate planning strategies to minimise IHT exposure and preserve wealth for future generations.”
As Yorkshire braces for record-high Inheritance Tax receipts in 2024, it’s imperative for residents to take proactive steps to safeguard assets and mitigate tax liabilities. By staying informed and engaging in strategic financial planning, property owners can ensure a smoother wealth transfer and leave a lasting legacy for loved ones.
Featured Photo by Bence Halmosi on Unsplash
