17% rise in number of families paying IHT

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17% rise in number of families paying IHT

You may or may not know that receipts from inheritance tax payments are still on the rise. Recent figures published by HMRC show that an increasing number of families in the UK are now paying more inheritance tax (IHT) than before, and this trend is likely to continue. The HM Revenue & Customs (HMRC) report shows there were 27,000 inheritance tax (IHT) paying estates in 2020/21 tax year. This is an increase of 4,000 (17%) from the previous year.  

The tax landscape in the UK is complex and ever-changing, and with this latest rise in the number of families getting an IHT bill following the death of a loved one has significant implications for many people, especially those with estates worth more than £325,000. In this blog post, we’ll explore the reasons behind the recent increase in IHT payments, the potential impact on families, and some useful tips for mitigating your tax bill. 

Why has there been a 17% rise in the number of families paying IHT? 

Inheritance tax is only payable on estates worth more than £325,000, or, if passed directly to a son or daughter, the tax-free thresholds extends by another £175,000, totalling £500,000 – doubling to £1,000,000 for a couple.  

Over the past decade, there has been a significant increase in property prices, particularly in London and the South East. As a consequence of increasing asset values and static reliefs, there are many more estates which previously fell short of reaching the tax paying threshold now dragged into this category; this means more people are now facing an inheritance tax bill. The tax-free threshold has remained at £325,000 since 2009, while house prices have continued to increase. These two factors have lead to many more families falling into the inheritance tax bracket. 

Further rading: IHT Rates and Tresholds  

What’s the potential impact of the rise in IHT payments on families in the UK? 

The rise in inheritance tax payments could have a significant impact on families in the UK. Estates that were once exempt from tax are now liable, which means that many more people are likely to be affected. This could result in families having to sell property or other assets to pay the tax bill, or they may need to take out a loan to cover the cost. For business owners, this tax bill could also mean that the business owner has to take out capital injected into the business to cover the IHT payment, ultimately harming the company’s liquidity and longevity. 

How can families minimise their IHT bill? 

Although the tax landscape can feel daunting and uncertain, there are various ways to mitigate your IHT liabilities. Gifting during your lifetime can be an excellent way to reduce your tax bill, as well as trusts or overseas pensions. By seeking advice from a financial advisor or a tax specialist, you can ensure that your estate planning takes advantage of all available exemptions and reliefs. 

IHT Planning Guide

Soteria Trusts’s QNUPS solution  

One of the solutions used to reduce or eliminate IHT completely is a structure called QNUPS. The QNUPS legislation, also called “The Inheritance Tax (Qualifying Non-UK Pension Schemes) Regulations 2010”, is a set of rules that must be met and followed by Non-UK pensions schemes to put each members pension fund beyond the reach of UK inheritance tax (IHT). 

Soteria Trusts specialises in advising clients about this solution, explaining it detail the multiple benefits beyond the IHT mitigation, and how QNUPS can form a part of one’s wider Estate Plan.  

Related: What is a QNUPS? 

What’s the future of inheritance tax in the UK? 

The rise in inheritance tax payments shows no sign of slowing down, and it’s highly unlikely that the current tax threshold will rise any time soon. With the ever-changing landscape around Brexit and COVID-19, it’s challenging to predict what the future holds for inheritance tax. However, by planning for the future and taking advantage of the available exemptions, families can minimise their tax exposure.  

Estate Planning and Inheritance tax are not subjects everyone wants to think about. Nevertheless, it’s important to be aware of the rise in IHT payments, as this could have a significant impact on your succession planning. Taking action now can help mitigate your tax bill and make sure you leave more of your estate to your loved ones. By seeking advice from a financial advisor or tax specialist, you can create a tailored IHT plan that takes into account all the intricacies of your estate, making sure you don’t pay any more tax than you need to. 

Contact the team at Soteria Trusts to learn more about multiple HMRC-approved ways to minimise Inheritance Tax on your estate.  



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