TWENTY-ONE years ago, on 25 July 1986, inheritance tax (IHT) was born.
A happy birthday for current Chancellor, Alistair Darling, because IHT is expected to net the government £4bn this year, four times as much as in 1986.
IHT is mainly a tax on what someone leaves at their death – their estate – plus most lifetime gifts they made in the seven years before death. The first slice is tax-free, then IHT bites at 40%.
In 1986, the first £71,000 of an estate was tax-free and the average home, at £36,2765, was worth around half the tax-free slice.
Today the first £300,000 of an estate is tax-free but the average home swallows two-thirds of this.
The increasing number of people who are being dragged into the IHT net have two choices: accept that they’ll be leaving money to the taxman, or take steps to reduce the amount.
The Which? Essential Guide to Giving & Inheriting explains:
Who should worry about inheritance tax
How to save tax by making a will
How to make tax-free lifetime gifts of any amount
Jonquil Lowe, author of The Which? Essential Guide to Giving & Inheriting, says: “IHT used to be a tax on people who lived in stately homes. Now it’s a concern for people with semis in suburbia.
“It’s important that people make full use of their allowances and use other devices to save IHT, or they may be leaving their money to the taxman.”
Giving and Inheriting, a Which? essential guide, can be ordered on 01903 828557 (£10.99, p&p free).
