Important note: Tax reliefs are subject to change and are dependent on each client’s personal situation, we recommend speaking to a financial or tax adviser.
Figures released in April 2024 shows record receipts for the tax year 2023/24 of £7.5bn, which is up £0.4bn on the previous tax year.
Inheritance tax has historically been considered a tax for only the very wealthy, but a combination of frozen thresholds and soaring property prices means that more people are inevitably getting caught in the net.
Tax free allowance
The tax free allowance on inheritance has remained at £325,000 since 2009, and it is set to stay there until 2028. Once the threshold is exceeded the tax rate will be 40%.
Since 2009 the average house price has grown by 85%, so many more estates will exceed the threshold.
Taking action
Investments which are IHT exempt, such as EIS, could play a key role in estate planning. With EIS you can invest up to £1million every year (rising to £2million if you invest in a Knowledge Intensive Fund). The money invested within an EIS will be exempt from IHT after 2 years (other asset classes such as gifts and trusts have a requirement of 7 years.) The relief is automatic and the holding is eliminated from the estate value and passed on without any tax, providing the shares are held at the time of death.
Investing in an EIS means investors can also:
– Claim Income tax relief of up to 30%
– Benefit from loss relief should the investment be sold at a loss
– Utilise capital gain tax deferral and reliefs
Tax reliefs are subject to change and are dependent on each client’s personal situation, we recommend speaking to a financial or tax adviser.