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Can I avoid Inheritance Tax?

In reaction to the growing hole in public finances, Chancellor Jeremy Hunt’s recent Autumn Statement has capped the current Inheritance Tax thresholds until at least April 2028.

With the government recently making changes surrounding the Inheritance Tax threshold, Jordan Rodwell from our Wills, Trusts & Probate team discusses what this could mean for those looking to leave an inheritance for their loved ones.

Although a tax freeze sounds like something we should all be cheering about, a frozen Inheritance Tax scheme means that bereaved families are now more likely to face much larger tax liabilities in the future. Inevitably, this will affect families that would otherwise not consider themselves as remarkably wealthy, stretching their pockets even further.

A combination of inflation and ever-rising house prices has contributed to a steady growth of the average value of estates. Consequently, more and more people are finding themselves above the Inheritance Tax thresholds which have now been frozen for nearly two decades. These thresholds establish a nil rate band of £325,000, with an additional £175,000 where the deceased’s residence is left to direct descendants.

As those thresholds fail to adjust in line with inflation and property values, estates that would already be expecting to cough up on Inheritance Tax must also increasingly hand over even more to HMRC.

This growing Inheritance Tax burden has led many to question whether they can avoid paying the tax altogether.

Whilst you cannot lawfully avoid Inheritance Tax, if your estate is over the relevant threshold, there are various way to reduce your liability by utilising the available exemptions, allowances and trusts. Approaching such estate planning steps must be taken with caution though; Capital Gains Tax can arise and local authorities may investigate them as a self-deprivation of assets were you to move into a care home.

There are obvious benefits to reducing your Inheritance Tax bill, however, ultimately ensuring that your loved ones inherit as much as possible when you pass away. This is vital in a world where a growing number of families rely on receiving inheritance to get onto the property ladder, afford a holiday or retire with comfort.

If you would like to discuss how you could reduce your estate’s future inheritance tax liability or revise your will in preparation for when the time comes, please contact our Wills, Trusts and Probate Team on 01603 620508, who would be happy to have a no-obligation chat about your circumstances.

This article was produced on the 13th January 2023 by our Wills, Trusts & Probate team for information purposes only and should not be construed or relied upon as specific legal advice.

Our Wills, Trusts & Probate team are recommended in The Legal 500 UK for their strong private client practice across our three branches. Partner and head of department, Lisa Glynne is also recognised as a 'Leading Individual' in the rankings.