It has been almost 2 years since COVID-19 was first documented in the UK and there is still much uncertainty about the true impact of coronavirus on all aspects of our lives. Inheritance tax is no different, where the value of estates, inheritance tax planning, and the valuation of business assets inheritance tax has been affected both directly and indirectly by the pandemic. In this article, we consider some of the reasons why inheritance tax has been affected by the COVID-19 pandemic.
Is inheritance tax rising to cover COVID-19 costs?
According to the National Audit Office, the government has spent over £372 billion on supportive measures related to the pandemic. Consequently, the Chancellor must implement measures to offset this expenditure. Whether this will cause a rise in inheritance tax is to be determined. While the rate of inheritance tax and the thresholds for liability will remain the same, the number of estates liable to pay inheritance tax is increasing.
In January 2022, updated statistics from HMRC revealed that £4.6 billion in inheritance tax was paid to the Government between April and December. That represents a £600 million increase when compared to the same period in 2020.
Increased value of estates
Currently, inheritance tax is charged on the part of the deceased’s estate that is above £325,000 at a rate of 40%. However, the UK’s housing crisis and soaring property prices mean that more people than ever are becoming liable to inheritance tax charges.
Lack of inheritance tax planning
The increased value of estates has an impact on people from all walks of life. Many people who would have never expected the value of their property or other assets to exceed the inheritance tax threshold are failing to properly plan for inheritance tax and take steps to mitigate their inheritance tax liability.
Similarly, the pandemic has sadly caused thousands of sudden deaths. It is common for people to avoid estate planning until they fall ill or grow old. Many people may never have even considered estate planning because they were previously in good health.
How can I mitigate my inheritance tax bill?
The good news is that with proper estate planning and a properly drafted Will, you can take steps to dramatically mitigate your inheritance tax liability. For example, when you leave your home to a descendant in your Will, the threshold is increased by £175,000 which is a huge potential tax saving.
If you are concerned about inheritance tax, you can put your mind at ease by discussing your concerns with one of our experienced estate planning solicitors who can advise you on your specific circumstances. Howell Jones are an award-winning solicitors that support individuals and businesses across Addlestone and Surrey with a range of services.