Act now to stop your legacy being shrunk by growing inheritance tax net

Britons are being urged to act now to reduce the impact of a raid on the legacies they want to leave to loved ones in the form of inheritance tax.

The warning from Nigel Green, the CEO and founder of deVere Group, one of the world’s largest independent financial advisory, asset management and fintech organisations comes two weeks ahead of Chancellor Jeremy Hunt’s Spring Budget on March 15.

In the Budget he will update to parliament and the public on the state of the UK economy since the Autumn Statement in November, and announce further economic plans for 2023-24 and beyond.

The deVere chief executive says: “Inheritance tax is the most hated of all taxes. People despise the idea of money that they’ve already paid taxed on being taxed yet again. 

“It’s a human instinct that they would rather their loved ones benefit from their legacy, than it being taken by the government.”

He continues: “Everyone is now looking to see what changes, if any, Chancellor Jeremy Hunt will make in his first full Budget on March 15. 

“But even if the IHT regime is untouched, more and more families will still be pulled into its jaws because the nil-rate band and residence nil-rate band are locked into place until at least April 2026. 

“IHT is very clearly no longer just for the super-wealthy, as it was originally intended.

“It’s hitting a growing number of ordinary families every year whose main asset is their family home.”

Some reports say that in future as many as one in 10 estates could pay 40% tax on some wealth left by loved ones.

IHT is an increasingly lucrative ‘cash cow’ for the government – and this will continue as the freeze continues.

HM Revenue & Customs (HMRC) took in £5.9bn from IHT between April 2022 and January 2023, which is £854m more than in the same period a year earlier. “The trend is clear,” observes Nigel Green.

However, planning can help mitigate the impact of “the most hated tax.”

The deVere CEO explains: “Establishing a trust, using gift allowances which allow you to pass on money to loved ones whilst shrinking your estate, holding properties as ‘tenants in common with your spouse, and investments that qualify for relief, are amongst the ways financial advisors can help you pass on more to your loved ones.”

Nigel Green concludes: “You should work with an advisor to explore the available solutions to limit the amount your loved ones may potentially lose from your legacy due to being dragged into the IHT net.

“Tax planning can be complex. The time to act is sooner rather than later.”