The Office for Budget Responsibility (OBR) has warned that the Treasury is on track to reel in a record-breaking £5bn in Inheritance Tax (IHT) this year – a figure which is expected to exceed more than £6.2bn within the next five years.
This would represent double the amount paid by Britons in 2012.
Currently, IHT is payable in the UK on any property and financial gifts passed down to beneficiaries at the point of death at a rate of 40 per cent.
However, an IHT threshold or ‘nil rate band’ exists which enables each individual to pass on up to £325,000 worth of assets tax-free before they incur this charge.
The nil rate band doubles to £650,000 for married couples and civil partners.
But in April this year, a new additional residence nil rate band (RNRB) was introduced to benefit those who wish to pass on their main residence to their children or other lineal descendants.
Under the new legislation, Families can pass on an additional £100,000 of their main residence’s value to ‘qualifying beneficiaries’ such as children or grandchildren – which may also include stepchildren or foster children.
However, in order to benefit from the RNRB, it is important to seek specialist legal advice to review your Will and make the necessary provisions. The laws surrounding IHT are growing increasingly complex and it is important to seek the advice of an expert solicitor who can tailor your Will to suit your unique circumstances.