By David Porter, Financial Planning Consultant, Armstrong Watson LLP

TAX-payers have paid £600 million more in Inheritance Tax (IHT) than a year ago.

The latest figures from HMRC show that between April and October this year, IHT receipts totalled £3.6 billion compared with £3bn in the same period in 2020 – a rise of 20 per cent.

IHT is not just for extremely wealthy people to worry about. Rising property prices means that inheritance tax receipts paid to the Exchequer continue to rise and with the threshold frozen at £325,000 until 2026 it’s expected many more are being caught out as it’s no longer uncommon to own a home worth that amount or more.

HMRC collected £5.13bn in IHT in 2019-20 and the amount of inheritance tax collected in the future is expected to be well in excess of £6bn by 2023-24.

Thinking about how your assets will be distributed after your death is not always a comfortable thought, however, it is one of the most important and valuable things you can do. At the very least you should make a will to clarify your wishes. If you don’t the state will take over and distribute your estate according to a formula set out in the rules of intestacy. The results are not always what you would expect and can also potentially create unnecessary tax consequences.

There are currently many ways IHT can be reduced, offset or eradicated altogether. Potential considerations could involve simply giving your money away to reduce your estate such as lifetime gifts or through regular surplus income, using life assurance policies to protect any tax liabilities, through to setting up trusts to shelter your assets. Solutions do not, however, have to involve a reduction in your lifetime benefit of funds or assets, it is a case of determining what is the right solution for each individual and family.

The rules around IHT can be complex, and the amount of tax, and even the overall rate that will be paid, will depend on how your finances are structured during your lifetime, how you dispose of your assets and to whom you leave them. Seeking independent tax and financial advice can help you pass your assets to the people you want to benefit and potentially mitigate some or all of the IHT liability.

At Armstrong Watson, our quest is to help our clients achieve prosperity, a secure future and peace of mind. For advice on inheritance tax, get in touch with David Porter on 01756620049 or email