The potential increase in inheritance tax (IHT) proposed by Chancellor Rachel Reeves is causing concern among families who may be affected by the changes. While the specifics of the proposed changes remain uncertain, it is important for individuals to understand how these adjustments could impact their financial future.
Inheritance tax is a levy imposed on the estate of a deceased individual, with only a small percentage of families actually paying this tax due to most estates falling below the tax threshold. It is crucial to note that anything left to a spouse or civil partner is exempt from inheritance tax, regardless of the estate’s value. However, partners who are not married or in a civil partnership do not benefit from this exemption. Each person is entitled to a £325,000 inheritance tax-free allowance, with estates exceeding this threshold being taxed at a rate of 40% on the excess.
The government is considering various measures to increase revenue, including revisiting rules related to gifts given during an individual’s lifetime. Any changes in exemptions and reliefs could potentially impact gifts made to children, businesses, and agricultural land. While the government has assured that tax increases will not affect “working people,” it is likely that the wealthiest individuals will bear the brunt of these new measures.
It is essential for individuals to seek independent advice on tax planning in light of potential changes to inheritance tax rates and exemptions. Those planning to leave an inheritance may need to review their options to minimize tax liabilities and ensure that their financial assets are protected.
In conclusion, the proposed increase in inheritance tax underscores the importance of staying informed about potential changes in tax regulations and seeking professional guidance to navigate these adjustments effectively. As the government explores ways to raise revenue, individuals must be proactive in managing their financial affairs to safeguard their assets and secure their family’s financial future.
