Are people in your area paying the most inheritance tax?

Inheritance tax (IHT) is a great earner for the Treasury. The government collected £2.7bn in IHT receipts from April to August in 2021, an increase of £0.7bn from the year before.

The next few years could see that amount creep up further. The nil-rate band of £325,000 has been frozen until 2026, and the Office for Budget Responsibility forecasts that receipts will grow every year, hitting over £6bn for the first time in 2023.

But the average bill varies across the UK. London and the South East stand out as paying above average.

Are people in your area paying more or less than the UK average?

Source: HMRC Inheritance Tax Statistics, 2018/19 tax year (the most recent regional figures available).

Some ways to reduce an IHT bill

The first step is to get to grips with the basics. There are lots of simple steps you can take to pay less IHT.

For example, gifting can be a great way to give children or grandchildren a great start in life, while reducing the future value of your estate for IHT purposes.

Everyone has the following tax-free allowances for making gifts:

Annual exemption – in each tax year, you can make gifts up to the annual exemption of £3,000. On top of this, any unused exemption from the previous tax year can also be used – so up to £12,000 per couple can be gifted in this way in a year.

Gifts from income – you can make regular gifts out of income which will be completely exempt from any future IHT liability. These gifts must be from your post-tax income, made habitually, and leave you with enough income to maintain your standard of living.

Marriage gifts – parents and grandparents can make one-off gifts on the marriage of children or grandchildren (up to £5,000 and £2,500 respectively). If you aren’t a parent or grandparent, you can still use this exemption to gift up to £1,000.

Small gifts – in each tax year you can gift up to £250 to any number of people, as long as they haven’t received a gift which uses another exemption.

Donations to charities or political parties – gifts to these types of organisation, either during your lifetime or via your will, are exempt from IHT.

You can find more expert hints and tips in our guide to saving Inheritance Tax.

Download your copy

Want to talk it through?

If you think you could be affected by IHT, one thing is certain, the sooner you act, the better placed you are to reduce the potential impact.

What happens to your wealth after you're gone is a sensitive topic. Knowing you could save your loved ones tax could be some weight off your shoulders.

Start by booking a call with our advisory helpdesk. They'll help you understand whether advice could be right for you. If it is, we'll book your free initial consultation with a specialist financial adviser.

There's no pressure to take advice, but if you do, there’ll be charges, which we'll discuss with you.

With careful financial planning, our advisers can help you with your IHT planning. They can also help you understand how tax rules apply to your personal circumstances, but for complex tax calculations, we recommend speaking to a tax specialist.

Find out more about IHT advice at HL