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Record inheritance tax revenue prompts warning

A legal expert has warned of the importance of good planning after it was revealed the Government collected a record amount of inheritance tax over the last financial year.

Inheritance tax (IHT) is the tax deducted from an estate following a person’s death. Currently, when someone dies, they can leave up to £325,000 of their assets to a loved one without needing to pay IHT.

In the last tax year, HMRC collected £4.7billion in IHT, reportedly the largest amount taken in the last 30 years, and more than 20 per cent up on the previous year.

Kathryn Harwood, head of Wills & Estate planning at North West law firm Napthens, warned that the record income from IHT is a timely reminder of the importance of good planning.

She said: “IHT is no longer a tax for the wealthy. Increasing house prices have meant that more and more people are affected.

“However, there are many steps which can be taken to properly mitigate IHT with many tools available to people which should be considered.

“IHT comes into effect after the allowance of £325,000, known as the nil rate band, is reached. This is per individual, so for a married couple or those in a civil partnership, the threshold is £650,000.

“These thresholds are due to change in April 2017, introducing a new allowance for a residential property, meaning that by 2020 an individual’s total IHT free allowance will potentially be £500,000 with £1m for married couples. In the meantime, it’s important to get proper advice about what can be done.

“Consideration can be given to making gifts to children, setting up a trust or investing in companies which qualify for business property relief.

“Every option has complex rules and advice must be taken from an expert.”