More than £30 million of Inheritance Tax saved through gifting

Over £5.4 billion in Inheritance Tax (IHT) receipts was received by HM Revenue & Customs (HMRC) in the 2020-21 tax year.

Of that figure, analysis reveals that more than £30 million was saved by taxpayers last year thanks to gifting.

This is an increase of £190 million or four per cent on the figures from the 2019-20 tax year, with estimates from the Office of Budget Responsibility suggesting that the nation’s IHT bill may hit a record high of £6 billion next year.

IHT receipts continue to rise year on year, despite the Government extending the residence nil-rate band over the last half a decade to allow a couple to pass on up to £1 million to direct family members.

The continuing upward trajectory of IHT bills is thought mainly to be the result of rising house prices, which have seen a further boost this year thanks to the stamp duty holiday.

Despite the amount of IHT being collected, a study of the latest data shows that more people are making use of gifting to reduce their bill, in particular, the annual gift allowance that allows taxpayers to give £3,000 each year without incurring IHT liabilities.

However, despite the benefits it offers, some within the accountancy profession feel the allowance should be increased to represent inflation since its introduction in the early 1980s.

Estimates suggest that if this was taken into account the allowance should be worth up to nearly £12,000 – four times as much as the current amount.

For help and advice with IHT get in touch with our team today.

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