Britons have been warned they should review their personal finances ahead of Jeremy Hunt’s Budget later this year.
Inheritance tax is expected to reach a record high this year, meaning people could end up paying more tax on profits and dividends, inheritance tax included.
The Government took £5.3billion through inheritance tax receipts in the months from April to December 2022.
HMRC receipts could be 13.7 per cent higher than 2021 to 2022.
Inheritance tax is charged at 40 per cent on anything over the £325,000 threshold.
The exception being if the deceased leaves everything over £325,000 to a civil partner, spouse or to a charity.
Inheritance tax is charged at 40 per cent on anything over the £325,000 threshold.
Dominic Lipinski
This is applicable after deducting any liabilities, exemptions and reliefs.
It means that 40 per cent of someone’s long-term savings could eventually be taken away in the form of tax.
The threshold is not expected to change in the Chancellor’s Budget, which is set to be announced on 15 March.
In November, Hunt said the income tax personal allowance, higher rate threshold, main national insurance thresholds, and the inheritance tax thresholds will be frozen until April 2028.
This will inevitably result in more people paying more tax as a result of “fiscal drag” as wages increase.
But older generations could pass on their wealth without paying tax if they take advantage of gifting allowance in the next two months.
Tax partner at Evelyn Partners, Anthony Whatling, urged people to review their personal finances.
“It’s one of the most decisive tax-year ends in decades. So if not done already then it’s definitely time for earners, savers and investors to review their tax position”, he told IFA Magazine.
"Many allowances are calculated on a yearly basis, so a pre year-end review can help to identify any potential tax savings, particularly with the changes afoot.”
The threshold is not expected to change in the Chancellor’s Budget, which is set to be announced on 15 March.
Kirsty O'Connor
Using up annual gift allowances can be an easy way to avoid paying extra tax.
The annual gifting allowance limit is £3,000 but can only be brought forward one tax year.
This means anyone who uses it this year and has not before could get £6,000 tax free.
Married couples are still able to independently use gifting allowances so they could double this amount.
