Unlike many of us in the future, King Charles will not be required to pay inheritance tax on the fortune that he received from the estate of the Queen when she passed away last year.
However, for the rest of us who are fortunate enough to have assets above the inheritance tax threshold our dependents will not be so lucky. The threshold is currently £325,000, a figure that was set way back in 2009 and that, following Jeremy Hunt’s recent budget, will remain at that level until 2028 at least.
This means that each year, due to rising levels of wealth, primarily linked to property, more and more of us will fall into the trap of having to pay this tax in the future.
And this is reflected by the fact that the Office for Budget Responsibility, which is responsible for predicting the government’s finances, believes that the amount of inheritance tax paid by individuals in this country is on course to reach a post-war high.
Estates that fall into the tax are currently required to pay tax at the rate of 40% on anything that is above that threshold which, for many, can be a substantial sum and eat into the amount of money that individuals are able to leave to their dependants upon death.
The figures also bear this out. For the tax year ending April 2023, death duties collected by the Treasury hit some £7bn, a record and some £1bn above the previous highest figure seen. Go back just ten years and figures show that the Treasury’s take from this tax was just over £3bn.
But you can make plans to ensure that any tax that you have to pay is reduced as much as possible and if you believe that your assets upon death will exceed the £325,000 threshold then you should, if you haven’t done so already, take action to mitigate your potential liability.
The first thing is to make sure that you have taken advantage of all the allowances that are available to you, particularly if you have a significant amount of your wealth in property.
The second thing you should do is make sure that you plan, and plan to pay as little of this tax as you possibly can. You owe it to your dependents to do so.
But inheritance tax is a complicated area of financial planning and it is important that you take independent financial advice to ensure any plans you put in place are correct, legal and will save tax when you die.
