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TAX TIP TUESDAY: Inheritance Tax Bills Increase Despite Planned Simplification Review

Our 5-minute read – Tax Tips – for UK doctors and dentists will help you save tax, get organised with your tax affairs and make sure you meet important deadlines with ease.

This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice. 

Inheritance tax (IHT) is tax owed on a deceased person’s estate, which could be in the form of property, money, or other worldly possessions. IHT has a few workarounds though. You don’t need to pay any if the total value for your estate is below the £325,000 threshold or if you leave everything to your spouse or civil partner (or a charity or a community amateur sports club). You should still plan on reporting the estate’s value to HMRC even if it falls below the threshold.

Learn more about inheritance tax and how to reduce your bill.

According to new data published in July by HMRC, 2017/18 produced a record number of inheritance tax (IHT) receipts. The latest annual statistics release reported that IHT figures have increased two thirds over the last five years. The 2017/18 tax year resulted in £5.228 billion for the Exchequer. The report further indicated that IHT revenue has been growing quickly since 2009/10 when Treasury receipts hit a low because of the financial crisis and the transferable nil rate band.

Good news for HMRC, The Office for Budget Responsibility (OBR) anticipates that the increase will continue. However, the introduction of the residence nil rate band stands to help reduce the rate of growth over the next few years.

The residence nil rate band is an additional allowance for residences beyond an individual’s Inheritance Tax threshold.

General simplification review

At the moment, the Office of Tax Simplification (OTS) is conducting a “general simplification review” of IHT. They are concentrating on the administrative aspects of IHT, but the review will also study the “complexities arising from reliefs and their interaction with the wider tax framework”. The OTS has yet to release their findings, but there is a chance that changes and/or pre-emptive legislation will be offered alongside the report.

Inheritance tax is here to stay…

As IHT brings in a cool £20.5 billion a year for the NHS, the tax isn’t going anywhere, and Chancellor Hammond would need to find other ways of adding over billions of pounds a year to the coffers of HMRC. But there’s still time to reform your financial plans before any changes come into effect.

Speak to us about your inheritance tax planning

Inheritance tax is an expense many doctors and dentists seek to reduce. Working to provide for your family after you are no longer with them is extremely important, so working out a way to pass on as much wealth to your loved ones as possible should be a priority. Dental & Medical Financial Services can help you identify the traditional ways of reducing your IHT and we can also offer alternative solutions, catered to your individual circumstances.

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