The Need For Intergenerational Wealth Planning
Published / Last Updated on 23/09/2021
HMRC this week released figures for inheritance tax receipts for April to August at £2.7bn. This is a massive increase on IHT receipts of 35% for the same period in 2020 of £0.7bn.
This increase is partly due to increased deaths during the pandemic but also the fact that tax allowances are frozen until 2026/27. Interestingly, the main inheritance tax nil rate band of £325,000 has been in place since April 2009. Come 2026, this limit will have been frozen for a staggering 17 years.
Have you worked it out yet?
We are an ageing population. The baby boomers of the post war period are now in their mid 70’s. This generation had children to create another boom in the 1960s who are now in their 50s and 60s. These tranches of people are the generations that have benefitted from significant property growth, pensions and other wealth. Soon, the post war generation will pass their wealth to those born in the 60s and 70s that have also built up wealth. The intergenerational wealth transfer has started and we need to plan for the next generation down.
Clearly, HMRC is aware of the demographics of the UK and plans its tax changes accordingly. Is it really a surprise that the IHT nil rate band has not increased since 2009 and will not be reviewed until 2026?
Intergenerational Wealth Planning
Inheritance tax is the only tax you can legally plan to reduce or mitigate. There is no need for any inheritance tax to be paid in the UK.
It is your own fault if you or your family pay inheritance tax on death. Indeed, HMRC is banking on people being lazy and doing nothing. This technically means the small print in your will to state:
“I LEAVE ABSOLUTELY and WITHOUT CONDITION OR RESTRICTION 40% of my total wealth to HMRC and specifically exclude my children or loved ones from this part of my estate".
It is your fault if the tax bill on death is not zero, not HMRCs.
Start intergenerational wealth planning now and not when you are in your 80s. There are many ways to reduce inheritance tax liability without losing access to income or capital.
Ways to reduce IHT: https://www.financialadvice.net/reduce_inheritance_tax/zone/170
Ways to protect from Care Fees: https://www.financialadvice.net/protect_money_early_from_care_fees/zone/146
