Do we need more Inheritance Tax Advice?

Inheritance Tax Advice
Inheritance Tax Advice

Article by Phil

Do we need more Inheritance Tax Advice?

Rumours are swirling around Westminster that the Conservative Party are considering cuts to the Inheritance Tax (IHT) charge as part of their approach to the next general election.

The latest figures show that the treasury collected £3.9 billion in IHT in the Six months between April and September this year. That was £400 million more than the same period last year. It puts IHT receipts on track to break £8 billion for the year.

The current rate of IHT is 40%. But this is only payable where the value of the estate is over £325,000, or £500,000 including property. Married couples can share their allowances, which takes the allowance up to £1 million. The allowances haven’t changed for several years now, and more and more estates are being caught by IHT as house prices continue to increase, making Inheritance Tax advice even more important. Especially in the South. It has been suggested that the government may be considering cutting the rate from 40% or even abolishing the tax altogether.

The Institute for Fiscal Studies (IFS) is not impressed. According to the IFS only 4% of estates paid IHT in 2021/22, although this is set to increase to 7% this year. Of the £7 billion raised through IHT, the IFS estimates that almost 50% of any saving from scrapping IHT would be to the benefit of the rich. Thoe with estates over £2 million.

90% of estates which don’t pay any IHT would see no benefit. This is the majority of the country. According to research by Scottish Widows, almost 40% of retirees in London are set to retire with less than the minimum retirement income which is £12,800 a year. Retirees in Scotland and the North East are not much better off. The best places to retire are Northern Ireland and the West Midlands. But even here 30% of retirees won’t have enough to meet the minimum income standards.

Quilter have made some calculations about the potential costs of changing IHT rates. According to their research an increase in the IHT limit to £500,000 would cost HMRC £1.4 billion a year and would lift 12,500 families out of inheritance tax. That doesn’t seem to be a lot of people.

Alternatively, if the tax rate was reduced from 40% to 30% it would cost £2.5 billion a year but only save money for the same number of families. If the rate dropped to 20% it would cost £5 billion a year.

Most commentators think that the Conservatives might make this an election promise because any changes would be likely to be undone by a future Labour government anyway.

Back on the topic of Inheritance Tax advice, things haven’t improved in terms of estate processing times either. Quilter estimates that the average time for a grant of probate after submission of the application is 14 weeks. On average 23 weeks if there is a Wil in place and only 18 weeks if there is no Will. That’s nearly six months.

Just over half of people use a solicitor to deal with their probate application with the other half completing the process themselves. As financial advisors we deal with many probate applications on behalf of clients. We are usually best placed to deal with matters quickly and efficiently because we already have full knowledge of a client’s assets, including investments and pensions etc. A solicitor needs to gather all this information from the family in the first instance before being able to even start on the application.

Even though financial advisers can probably help with probate and Inheritance Tax advice in a more cost-effective way.

Not everyone thinks of using an adviser for help in the first instance.

In fact, the latest research from LV showed that the majority of people now look to websites for their information in the first instance.

  • 43% said they would look for a website first
  • Then 38% said they would use an adviser
  • 29% would ask family and friends.

Of those who used an advisor however, 86% said they saw the benefits of the advice.

Its not just IHT which is growing either. HMRC have reported a 27% increase in revenues from Capital Gains Tax on Trusts to over £1 billion. That’s from just over 650,000 Trusts which are registered in the UK. Only 3% of which submit a tax return. So, there are some pretty big trusts (mainly interest in possession trusts) out there paying a lot of tax. I would expect that are getting professional trust planning advice.


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Estate and Inheritance Tax Planning Explained

Christina Clegg IFA explains the benefits of estate planning and Inheritance Tax Planning.

If you have any questions about Inheritance Tax please feel free to give us a call on 01282 614444 or drop us an e mail to

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