Do you feel like you’re always being taxed?
We pay a huge amount of tax during our lifetime. In fact, according to research conducted in 2016, the average family with a combined income of around £41,000 per annum pays over £826,000 (1) in direct and indirect taxes over the course of their lives. Income tax; capital gains tax, stamp duty land tax; corporation tax; value-added tax, the list goes on…
With average council tax bills rising 57% over the last twenty years (to 2018/19) (2) and with 78 pence spent on every litre of petrol and diesel going to HMRC (2018 and the highest in Europe by the way!) (3) many people are surprised to learn that a further tax is paid when they die. In other words, the amount your family receive when you die is often significantly reduced because of the payment of Inheritance Tax (IHT) - and it must be paid quickly by the Executors who sometimes have to find the money themselves.
Inheritance Tax (IHT)
IHT is the tax levied by the government on an estate after someone has died. Put simply, IHT is paid at two rates; 0% on what is known as the Nil Rate Band (NRB), currently £325,000 and 40% paid on assets owned above the value of the NRB.
But, as you might expect, it isn’t quite that simple but let’s look back before we look again at how this tax could affect you and your family.
The roots of what we now know as IHT can be traced back to 1694 and the system developed further as funds were raised to fund the wars against Napoleon just over a century later.
And looking back further still, the idea of taxes was borne out of the victory at the Battle of Hastings in 1066 and Magna Carta a century and a half later.
Coming back to modern times the taxation system and IHT specifically is hugely more complicated than ever before.
Since 2007 we have seen layer and layer of complication added. Some things, however, remain predictable and consistent, HMRC continues to receive greater and greater IHT receipts. During the 2018-19 tax year the government collected £5.369billion IHT an 8% rise on the previous year (4) and it is suggested that in the next few years this figure will rise again significantly.
One of the main reasons behind the increase in IHT yields is the fact that house prices have risen dramatically and far more quickly than the NRB has.
But there is some better news… for some.
The introduction in 2007 of the transferable Nil Rate Allowance and the phasing in of the Residential Nil Rate Band which becomes fully available from 2020-21 means that many people can save hundreds of thousands of pounds by taking two important steps:
- Ensure that your Will is made in the most tax-efficient manner possible. People who have Wills made prior to 2007 may see the IHT bill INCREASE!
- Consider appointing professional Executors to ensure that all the available exemptions and reliefs are utilised. As the system becomes more complicated pre-planning probate becomes an ever more attractive option for many.
At Fortis Law you can receive information and advice aimed at helping you pass on as much of your hard-earned wealth to your family as possible. For many, IHT is a voluntary tax. At Fortis, we think you’ve probably paid enough tax in your lifetime.
Fortis… not just there for the bare necessities
(1) The Tax Payers Alliance 2016
(2) The Tax Payers Alliance 2018
(3) Statista 2019
(4) Analysis by financial advice firm, NFU Mutual
Benefits Cloud are delighted to be able to bring you a fantastic range of Estate Planning services from the trust provider of choice, chosen by the Institute of Professional Will Writers.
Remember, Fortis offer a free Health and Welfare LPA* with any Will purchase. You will be entitled to meet one of their advisers to discuss the offer and this meeting is without obligation. Should you decide to go ahead, you get one free LPA with the Will. At the appointment the adviser is likely to discuss your whole estate plan and offer suggestions, but it’s a free, no obligation meeting.
- Single client (Will and LPA) £195
- Couple (Mirror Wills and 2 Health and Welfare LPAs) £390
Call 03335 775393 to book an appointment and quote "LPA offer from Benefits Cloud"
*The Health & Welfare LPA: This LPA gives your attorneys the power to make decisions for you governing aspects such as; where you live, the type of care you receive, the care provider, but you are also able to give them the power to consent to/refuse medical treatment on your behalf.
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