An expert is urging families to ensure they plan properly to mitigate the effects of inheritance tax (IHT).
Official figures from the Office for Budget Responsibility show almost 33,000 families were estimated to have paid the 40 per cent levy, up by almost a third from 25,000 in 2019-20.
In April, May and June, HMRC collected £1.5bn – £400m more than in the same period last year and the overall total collected is set to top £6bn this year which would be a record.
Owen Kyffin, director of Whitley Stimpson, said the rise in the figures was being caused by the Government freezing allowances against a backdrop of soaring house prices and a mounting death toll caused by the pandemic.
“This money has already been subject to income tax and when an individual dies, it is taxed again which seems grossly unfair.” said Owen.
“IHT was originally intended to tax the very wealthy but more and more ordinary people are being sucked into it as house prices rise and often, they don’t realise until it is too late.”
In the Budget last March, Chancellor Rishi Sunak revealed that the £325,000 IHT threshold limit would remain frozen for five years as he looks to restore public finances in the wake of the pandemic.
It has not risen for 12 years during which time house prices have soared by 60 per cent.
An allowance, which gives and extra £175,000 of protection to those who pass on their main home to a direct descendant, has also been frozen along with capital gains and pension tax breaks.
Owen says families should seek advice to ensure their tax liabilities are managed efficiently rather than face more pain at the same time as dealing with the death of a loved one.
He added:
“There are several options to consider including setting up a family trust. Estates can be worth far more than people think but with a little careful planning, the impact of this swingeing and often unexpected tax bill can be reduced.”
For advice on inheritance tax matters or for further information visit www.whitleystimpson.co.uk