Is Your Family Protected From Inheritance Tax?

by Handy Mag
Published: Last Updated on

Craig Howard, PenLife Chartered Financial Planner, explains why you may wish to take advice.

With Inheritance Tax (IHT) bands frozen until 2028, and many assets appreciating in value, your family could be set to pay a large bill in the future.

Families who previously believed they may not need to pay IHT could now be being pushed above the tax-free threshold. This is already happening; HMRC reports that there was a 17% increase in the number of families who paid IHT in 2020/21, compared with 2019/20. In 2020/21, the average IHT bill stood at £214,000. As such, your family could face a substantial bill down the line.

Across the UK, house prices have risen substantially overall in the past 20 years, despite short-term fluctuations. Here in Yorkshire, this growth is particularly notable. According to plumplot, the average price of a home in Yorkshire was just £106,000 in 2003 – but in 2023, this now stands at £218,000. With a more than 100% increase in just 20 years, it’s likely that your home’s value has risen substantially and may continue to do so.

While this could be welcome news if you’re planning to sell your home in the near future, anyone who wishes to leave a family property to the next generation when they pass away should be aware of how their home’s value could affect an IHT bill.
There are plenty of options to consider if you wish to reduce your IHT bill while still leaving a property to your loved ones. Such as:

  • Reducing the value of your estate in other areas, such as your investment portfolio, over the course of your retirement. That way, your property wealth might make up the majority of what you own.
  • Arranging Life Assurance to provide a lump sum on your death to pay the IHT liability.
    If you are worrying about the looming presence of a potential IHT bill, it may be helpful to seek the support of a Financial Planner. We can:
  • Assess the total value of your estate as it stands now, and use cashflow modelling software to predict how it might grow over time
  • Draw up a financial plan that tells you how much you need to live comfortably in retirement, and factors in extra costs like later-life care
  • Look at whether it might be helpful for you to reduce the value of your estate through financial gifts, and talk you through the benefits and risks of doing so.

For bespoke guidance surrounding IHT, contact us today. Email enquiries@pen-life.co.uk, or call 01904 661140. We are also offering a free IHT guide that covers more ways to help reduce your IHT bill. To request your copy, please visit www.introtoiht.co.uk.

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