HMRC in record-breaking Inheritance Tax raid as families urged to take simple step to avoid huge bill
The Government department saw inheritance tax paid last month come to the figure of £531million.
PA
HMRC has had a record breaking tax year, with the inheritance tax from February bringing the total for the 2022/23 financial year to £6.4billion.
The Government department saw inheritance tax paid last month come to the figure of £531million.
In the 2012/22 tax year, the Treasury received £6.1billion, meaning the amount has already been beaten with another month to go until the end of the financial year.
Inheritance tax is applied to inherited assets worth more than £325,000, or total assets in excess of £650,000.
Inheritance tax is applied to inherited assets worth more than £325,000, or total assets in excess of £650,000.
PA
Last week, the OBR estimated that the Treasury will receive £3billion more than originally forecast in the next five years from inheritance tax.
Britons have been urged to take one simple step to avoid receiving huge bills on their inheritance tax.
The tax rate sits at 40 per cent, which leads many to give away gifts so that they can reduce the size of their estate which is passed on.
This in turn reduces the amount of tax that is paid when it is eventually inherited.
The OBR estimated that the Treasury will receive £3billion more than originally forecast in the next five years from inheritance tax.
PA
But there are limits on what a person can give away in a year to avoid paying tax.
A person can give a larger gift worth any amount and avoid paying tax on it as long as they live for at least seven years after it is given.
The amount of inheritance tax the inheritor will be required to pay reduces in increments over the course of the seven years, this is called taper relief.
The Government explains: “Taper relief only applies if the total value of gifts made in the 7 years before you die is over the £325,000 tax-free threshold.”
The government gives individuals an annual gift allowance of £3,000, meaning couples are entitled to a £6,000 allowance.
PA
Gifts are taxed on a sliding scale over the seven years, reducing at a rate of:
- Three to four years - 32 per cent
- Four to five years - 24 per cent
- Five to six years - 16 per cent
- Six to seven years - Eight per cent
- Seven or more years - Zero per cent
The government also gives individuals an annual gift allowance of £3,000 which means a couple are entitled to a £6,000 allowance between them.
Individuals who decide to take advantage of the allowance must ensure they make a record of what they give, who they give it to, the value of the gift, and when it was given away.