Landlords are being advised to place greater emphasis on strategic planning, as new data released by HM Revenue & Customs (HMRC) highlights a considerable year-on-year increase in Inheritance Tax (IHT) receipts.
The figures suggest that £1.2 billion was collected in the initial two months of the 2023/24 financial year – a 13 per cent rise from the same period the previous year.
This clear surge in IHT revenue underscores the intensifying effects of IHT on landlords and property owners, who have seen a surge in the value of the properties they own in recent years.
The latest figures pinpoint the critical need for tax and estate planning, including the creation of an updated Will.
The Office for Budget Responsibility (OBR) has projected that IHT could generate as much as £7.2 billion this financial year, rising to an estimated £8.4 billion by 2027/28.
The increasing IHT revenue is primarily attributed to the unchanging nil-rate bands, which have failed to match inflation rates and the escalating value of properties.
With no adjustments, a growing number of estates, particularly those including rental properties, are falling into the IHT bracket.
This highlights the necessity for landlords to grasp the IHT regulations and shape their estate planning strategies accordingly.
The strategic planning of IHT isn’t solely about tax reduction but also about maximising the efficient transfer of wealth to your loved ones.
For landlords, this means understanding potential reliefs and exemptions available, including spouse exemptions, the residence nil-rate band, and potentially exempt transfers.
Furthermore, it involves ensuring that your Will is up-to-date and reflects your current wishes, considering the use of trusts to regulate the distribution of your assets, and evaluating lifetime gifts as a means of lessening your estate’s value.
As long as IHT remains a key aspect of the tax landscape, landlords must undertake careful planning. To find out how we can help you with your tax and estate planning, please contact us.
