How investors can reduce inheritance tax liability

Chris Street

30th September 2017

By Louise Misiewicz

Are you aware of tax planning around inheritance tax law?

How can you reduce IHT liability and protect your wealth?

As a leading tax specialist in the UK, nearly every client consultation I have now involves discussing the inheritance tax (IHT) liability of each property investor and buy-to-let landlord client I’m working with.

Recent statistics highlight that the HMRC has raked in an extra six per cent year-on-year, according to latest figures. Almost £2billion has been taken from UK estates in three months alone between April and July 2017 – meaning that there is an increased focus on inheritance tax (IHT) and payments from estates.

It’s critical for investors to consider their estates, and to ensure that they reduce their inheritance tax liability, to prevent large unwanted IHT bills being presented to them in coming months.


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The HRMC is focusing on inheritance tax by looking much more closely at estates and challenging claims for reliefs. When IHT receipts rise, in my experience, it is often due to a more buoyant property market.

However, according to the ONS, house prices have dropped in the last year compared to the previous year with the growth rate slowing since mid-2016.

Read more from the ONS in their latest report here.

And with property prices lowering, I would say that the sharp increase in receipts is a more aggressive approach to IHT from the HMRC. The critical element is to ensure that you’re able to deal with this.

I am currently urging investors to take steps towards wealth management and tax planning around their IHT liabilities.

The extra scrutiny from the HMRC could mean that those investors who haven’t taken professional advice or planning could be caught out, which may have a catastrophic effect on their future family wealth.

IHT is one of the more complex taxes that I work on with investors, and there are plenty of traps to fall foul of.

Inheritance tax is currently charged at the rate of 40% on estates in the UK worth more than £325,000. The government also introduced a Residence Nil Rate Band (RNRB) in April, helping to protect the main home asset by another £100,000, but I’m also advising investor clients to ensure they complete a review.

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It is important to remember that rising house prices mean more investors are set to be potentially caught out by inheritance tax regulations. There are, however, ways to easily and legally reduce it – and, in some cases, to completely mitigate inheritance tax liabilities.

Investor have options for Gifting allowances, and any wealth given away more than seven years before death is not liable for inheritance tax. These are two basic and immediate measures that can be taken.

It’s important to discuss options with a professional tax accountancy expert sooner rather than later.

Other articles I’ve written around CGT and tax planning which are useful for investors include:

How to mitigate Capital Gains Tax when selling property

Inheritance Tax planning – getting the basics in place

Inheritance Tax Toolkit for buy-to-let landlords

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