Inheritance Tax

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Inheritance Tax

Inheritance tax as we know it was introduced by the Conservatives in 1986, when it was set at the rate of 60%. This rate however was reduced to the slightly more palatable but nevertheless punitive level of 40% two years later.

The tax was intended to hit only the very wealthy and until recently, only a small percentage of estates had any inheritance tax liability. For those in this situation, there have been a number of legitimate options for tax and estate planning available. All this is changing however as house prices have spiralled upwards and more and more middle class families are finding themselves dragged into the inheritance tax net. Meanwhile in the 2006 budget, the chancellor has made things even more difficult for those potentially affected by changing the tax rules on many types of trust (in some cases retrospectively rather than simply on new trusts being set up) intended to protect dependents from having to face a hefty tax bill.

Previously, the level at which inheritance tax became payable (known as the nil rate band or NRB) was £255,000. This has risen slightly and will continue to do so as follows:

Revenue generated from inheritance tax has nearly doubled since Labour came to power, rising from £1.7bn in the tax year 1997/98 to an expected £3.3bn for 2006/07 and these levels are set to go on climbing. Although the nil rate band has been increased, this is far outstripped by house price increases and millions of people in the UK will now have to revisit their wills and the terms of any trusts they have set up to look carefully at the tax implications facing their families. The families of those dying intestate are now also more likely to face heavy tax bills.

Seeking professional advice has always been a good idea when thinking about estate planning but is now even more important, if not urgent following the 2006 budget, particularly if you have no will or if your existing will includes certain types of trust. For expert help, please complete our Quick Enquiry Form and we will arrange for one of our independent financial specialists to contact you. Or you can call us on local rate 0845 108 0505.

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