Inheritance tax raid as HMRC claws back record sum

Inheritance tax: Expert provides tips on avoiding hefty bill

We use your sign-up to provide content in ways you’ve consented to and to improve our understanding of you. This may include adverts from us and 3rd parties based on our understanding. You can unsubscribe at any time. More info

Inheritance tax is charged at 40 percent of the value of a person’s estate above a specific threshold, usually above £325,000. People must pay the inheritance tax due on their deceased loved one’s estate promptly and in full.

When dealing with someone who has died, the executor of a will is legally required to complete a declaration for HMRC.

However, the Revenue can then open an investigation if it sees fit, either at random, or due to “red flags” raised when checking this declaration.

Investigations may come back clear, or could find someone has underpaid or submitted incorrect information.

However, both people who deliberately conceal money and make genuine mistakes are seen as legitimate targets for investigations.

As such, HMRC is increasing its efforts with investigations in the hope of cracking down on those who are underpaying inheritance tax.

According to data obtained by NFU Mutual from a Freedom of Information request (FOI), the amount raised by investigators in the year to March 2022 was 28 percent higher than for the previous 12 months.

Last year, it was found HMRC opened 4,258 enquires into families regarding inheritance tax. This is up from 3,574 the year before, although the COVID-19 lockdown did impact investigations being carried out. 

It was found HMRC clawed back a record sum of £326million through investigations last year.

Pensioners missing out on £1,100 per year extra income [INSIGHT]
State pensioners to look out for letter which may mean £3,500 boost [ANALYSIS]
850,000 pensioners could miss out on £900 cash boost this year [UPDATE]

There are ways Britons can ensure inheritance tax is being paid correctly by their loved ones after their death.

Firstly, people are encouraged to keep good records of any gifts or transfers they have made, as well as the value of their assets.

Experts typically state Britons should keep an up-to-date Last Will and Testament to avoid confusion about a person’s final wishes.

Some may also wish to seek financial advice to help them, as experts are well-versed in dealing with tax affairs. 

Previously a Treasury spokesperson told “The vast majority of estates do not pay inheritance tax – more than 93 percent of estates are forecast to have zero inheritance tax liability in the coming years.

“However, the tax raises more than £6billion a year to help fund public services millions of us rely on daily.”

In November 2022, Chancellor Jeremy Hunt announced his decision to freeze a number of tax allowances.

The amount an individual is allowed before inheritance tax is payable has now been frozen until April 2028.

This is an extra two years on top of the freeze Rishi Sunak enacted during his time as Chancellor.

What is happening where you live? Find out by adding your postcode or visit InYourArea

Explaining the decision, Mr Hunt said: “We are taking difficult decisions on tax-free allowances. I am maintaining at current levels the income tax personal allowance, higher rate threshold, main national insurance thresholds and the inheritance tax thresholds for a further two years taking us to April 2028.

“Even after that, we will still have the most generous set of tax-free allowances of any G7 country.”

The decision means more people are likely to be drawn into a tax bill as a result of fiscal drag.

Fiscal drag involves inflation or income growth moving people into a higher tax bracket.

With inflation soaring and tax allowances frozen, more people will have to consider an inheritance tax bill – when in the past, they may not have given thought to the levy.

This is likely to be compounded by rising house prices, which may see the assets of an individual be much higher than before.

An HMRC spokesperson said: “Our role is to collect the right amount of tax due under UK law. Cases are opened where we identify a risk of tax not being paid.”

Source: Read Full Article