More Inheritance Tax (IHT) was paid in July than any other month since records began, the latest figures have revealed.
The data comes after a spike in coronavirus-related deaths and months of probate delays.
Here’s what you need to know.
Inheritance Tax receipts rise by a third
According to HM Revenue & Customs (HMRC), a record £571 million in IHT was raised in July 2021 – representing the single largest month ever.
Receipts for April to July 2021, meanwhile, totalled £2.1 billion, up £0.5 billion (or around 33 per cent) compared to the same period last year.
Commenting on the figures, HMRC said: “Higher receipts in March to July 2021 are expected to be due to higher volumes of wealth transfers that took place during the COVID-19 pandemic, though HMRC cannot verify this until full administrative data becomes available.”
When is Inheritance Tax paid?
IHT is charged at 40 per cent on the value of the estate that exceeds the IHT threshold – currently £325,000 for individuals or £650,000 if combined with a spouse or civil partner.
If you give away your primary residence to children (including adopted, foster or stepchildren) or grandchildren the threshold increases to £500,000 or £1 million when combined with a partner.
The tax must be paid no later than six months from the end of the month in which the deceased died.
Why are Inheritance Tax receipts rising?
HMRC has attributed the increase in IHT receipts to “higher volumes of wealth transfers” (deaths) that took place during the Covid-19 pandemic.
But experts also argue that the IHT threshold has failed to keep up with inflation and rising property values.
If inflation had been taken into account since April 2009, the individual threshold would now stand at £446,000.
How can I pass down more of my wealth?
Families who fear they may have to pay significant amounts of IHT should start planning for later life now. This might include giving gifts, leaving money to a charity, maximising your allowances, or creating a trust, among other options.
For help and advice with related matters, please get in touch with our later life planning team today.
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