The latest HMRC data reveals that Inheritance Tax (IHT) receipts for the period April 2021 to February 2022 stood at a whopping £5.5 billion, £700 million higher than the corresponding period in 2021.
The average amount paid per estate was around £209,000 and this amount can often be mitigated by various well-accepted financial planning techniques, so there is no reason why the amount paid could not be reduced significantly.
Almost half of the UK population who have a Will have not updated it for more than five years, meaning nearly half of the wills in the UK are likely to be out of date. Of those, a third have not updated it for over seven years and a fifth have not dusted it off in more than a decade.
Surprisingly, research also showed that almost half of people realise that the law decides who will inherit your assets if you do not have a Will in place, but only a third of people realise that a couple living together without marriage or civil partnership will not inherit each other’s assets without a Will in place.
Only a third of people realise their spouse will not automatically inherit their full estate without a Will in place.
There are also some other alarming misunderstandings, such as that only 16% of people realise that remarrying invalidates the Will and less than a third of people realise that stepchildren will not be included in a Will unless stipulated separately. 17% of people think that a Will can be updated by making changes on the original document and initialling them.
In addition, there is a great concern over the drop in Will uptake since the pandemic. The number of Brits over the age of 40 who have a Will in place has dropped from 65% in 2020 to 54% in 2022.
Yet the latest HMRC data reveals that the Inheritance Tax take continues to rise inexorably. One of the reasons that HMRC gives to explain this is because of the higher volumes of wealth transfers that took place during the COVID-19 pandemic. The rise in Probate fees in February 2017 and November 2019 caused many executors to bring forward tax payments to avoid the higher fees.
Lower receipts in April and May 2020 were simply due to a temporary issue when HMRC were unable to accept cheques for payment of IHT due to COVID-19. However, once resolved, this led to a peak for June 2020 receipts.
Some of these statistics are very alarming indeed. Few people want their hard-earned assets going to HMRC either now or in the future – and people also want to ensure their loved ones receive the right amount of money at the right time.
At Foresight, we are experts in helping people to organise their affairs so that their estates are not liable to Inheritance Tax, and that their assets are passed on swiftly at the right time.
If you would like to see how you could improve your situation, then please contact us.