We Brits are paying an awful lot of inheritance tax these days.
The latest available figures, for 2012/13, show estates liable for inheritance tax faced an average tax bill of over £170,000 each.
This is an increase of nearly £5,000 compared to the previous year.
17,900 estates paid a total inheritance tax bill of £3.05bn in 2012/13.
This is an increase of 15% on the £2.65bn paid during the previous tax year, with more estates sharing the liability pushing the average paid per household up to 3%.
Only around 6% of estates are liable for inheritance tax; a figure which has remained fairly static over the past five years.
It was as high in 9% in 2007/08 but has fallen since.
Analysis by the insurer Prudential found that London and the South East are still the UK’s inheritance tax hotspots.
Between them they accounted for half of all inheritance tax payments in the 2012-2013 tax year.
Of all the estates above the £325,000 nil rate band threshold for inheritance tax, and therefore liable for the death duty, 42 per cent were from London and the South East.
The average inheritance tax bill was also higher in London than anywhere else in the country, with the average amount paid per liable estate totalling almost £236,000. This is 38% higher than the national average.
The Prudential analysis also revealed some significant fluctuations across the UK in the average increases in inheritance tax bills paid by eligible estates.
Here in Surrey, 970 estates were liable for inheritance tax in 2012/13.
It’s possible to structure your financial affairs to reduce or remove the inheritance tax bill faced by your family when you die.
Inheritance tax planning is often a trade off between effectiveness and continued control of assets, with the most effective forms of inheritance tax planning requiring assets to be moved outside of your control during your lifetime.
A good place to start is determining the likely inheritance tax bill your family could face when you die and then consider what steps you are prepared to take to mitigate this liability.
Here at Informed Choice, we combined inheritance tax planning with lifetime cash flow forecasting designed to demonstrate our clients will not run out of money and can afford to make gifts to children or grandchildren without reducing the ability to pay for their chosen lifestyle in retirement.
Do give me a call if you have any questions about inheritance tax or the steps you can take to reduce this tax bill.
