Inheritance Tax (IHT) receipts were up according to the latest HM Revenue and Customs (HMRC) data – showing the Government collected £1.5billion in the levy between April and June. This was £400million more than for the same period a year earlier. With IHT allowances frozen by Mr Sunak in the Budget, there have been concerns that more people are set to pay the levy as inflation impacts their estate.
He added: “If an individual really wants to go to town with Inheritance Tax planning, then they could really make significant savings.
“Often it does require that planning ahead, many years in advance – time is a really important factor.
“In this sense, that can be one of those big mistakes people can make, is leaving it until too late to review things.”
Thankfully, there are a number of steps individuals can take in efforts to reduce their Inheritance Tax bill.
Mr Rushton explained: “There really are some actions which are essentially the foundation to any Inheritance Tax mitigation strategy.
“It’s important to make use of all of, or as much of, the allowances and the reliefs that are available to you, and that HMRC allows.
“One particularly useful action is the £3,000 per year exemption, which if you gift away is immediately outside of your estate for IHT purposes, with no time implications.
“But that might not make much headway into your tax liabilities, so combining it with other options is going to be sensible.”
Mr Rushton also drew attention to another form of gifting which can come in the form of the small gifts exemption.
The rule allows Britons to give away £250 as many times as they would like to as many individuals as they wish, each tax year.
This can be done as long as someone does not use another allowance on the same person.
Certain people may also wish to make donations to charity, an action which can often be a win-win.
Those who gift money to charity see this sum immediately outside of their estate, and due to COVID-19, Mr Rushton highlighted many more are looking at worthy causes to help out.
This can also relate to Will planning on a larger scale, as if someone gives 10 percent of the net value of their estate to charity, they could drop their IHT liabilities from 40 to 36 percent.
While this may not appear a lot on the surface, Mr Rushton concluded that it could create a significant difference.
He continued: “Another aspect of IHT which can often be overlooked is the gifting of surplus income, which can help many individuals who have income that they aren’t spending – as the more money you save, the more you’re set to pay in IHT.
“Individuals could get into the habit of gifting away income which is surplus to their needs, and this is immediately outside of the estate.
“Later on in retirement, individuals don’t tend to be spending as much, they may have a decent pension, and they might be slowing down – not going on foreign holidays as much, for example.
“If people could gift that away then they don’t need it, and it doesn’t impact the estate their families or loved ones are set to inherit.”