In a society where the cost of living is continually rising and the burden of taxes weighs heavily on the minds of many, the recent findings on Inheritance Tax penalties in the UK are a cause for concern ...
The steep rise in inheritance tax penalties is a wake-up call for families!
Data acquired through a Freedom of Information request from NFU Mutual reveals that Inheritance Tax penalties have surged by 34%, raking in £2.28 million for HMRC in the last tax year compared to £1.7 million the year before.
"But why are Penalties Increasing?"
The increase in penalties is set against a backdrop of rising Inheritance Tax liabilities, with thousands of additional estates being subjected to the unpopular tax. Last year, 4% of estates paid IHT, with an average bill coming in at £214,000. The overall sum raised from it reached a record £5.76 billion in the 2022-23 financial year, and this is projected to escalate to at least £8 billion by 2028.
It's the complexity of Inheritance Tax law that is catching more people off guard, leading to higher penalties. Often, families fail to take 'reasonable care' in valuing the assets being passed down or forget to include gifts made by the deceased in the seven years leading up to their death ... which are liable for IHT.
The severity of the penalty depends on why the Inheritance Tax has been underpaid. If the error is a result of the family not taking 'reasonable care,' the penalty can rise to 30% of the additional tax owed. If the underpayment is deemed deliberate, the penalty can surge to 70%, and if it is 'deliberate and concealed,' a whopping 100% penalty can be applied on top of the additional tax owed.
Many families are also unaware that HMRC has a wide range of data sources to cross-reference, including land registry sales information. Not getting professional valuations for property and other assets could lead HMRC to believe that you may not have exercised 'reasonable care,' and you will get a penalty.
"Consulting a financial adviser such as myself is a prudent course of action!"
From taking advantage of allowances to setting up trusts, there are legal ways to minimise the tax burden. Your adviser will provide tailored guidance to ensure that you're taking the necessary steps to comply with tax laws, thereby potentially saving you from a hefty penalty.
The steep rise in inheritance tax penalties is a wake-up call for families who may not be fully aware of their IHT liabilities. With more estates being pulled into the net of this tax, ignorance is not an option.
Seek professional advice, understand the complexities of IHT, and make an informed plan to protect your family's financial future.
Until next time ...
HELEN BEAUMONT
Would you like to know more?
If anything I've written in this blog post resonates with you and you'd like to discover more about Inheritance Tax, it may be a great idea to give me a call on 01908 774323 and let's see how I can help.
Helen brings the personal tax planning experience of the top 20 tax companies to Essendon. Formerly of MacIntyre Hudson (with 45 offices nationwide), Helen worked at Chancery for more than 10 years before joining Essendon as the personal tax specialist.
Tax Planning can make a considerable difference to your tax liability. Helen has specialist knowledge and experience in tax planning and uses every opportunity to minimise your tax bill is utilised. By analysing your investments, income, profit and expenditures, Helen will provide strategic tax planning expertise that could offer significant savings, whilst delivering clear, honest advice and guidance.
When Helen is not at Essendon she spends time with her young son and likes going on long walks with the family dog.
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