Inheritance Tax reporting – recent changes

It can be tricky to keep up to date with tax changes and you may have missed this one, in relation to the reporting of Inheritance Tax (IHT), which came into force at the start of the year.

For anyone who dies on or after 1 January 2022, there are new rules about whether their estate can be classed as an ‘excepted estate’. So, before you make a report to HM Revenue and Customs (HMRC) you need to check whether you need to send full details and make sure you complete the right forms.

There are several reasons why an estate may now be classified as ‘excepted’:

  • The estate has a value below the current IHT threshold (£325,000 for one person)
  • Any unused threshold is being transferred from a spouse or civil partner who died first and the estate is worth £650,000 or less
  • The estate is worth less than £3m and the deceased left everything in their estate to their surviving spouse or civil partner who lives in the UK, or to a qualifying registered UK charity
  • The estate has UK assets worth less than £150,000 and the deceased had permanently been living outside of the UK when they died.

You do not have to give full details of an estate’s value if all the following are true:

  • The estate counts as an ‘excepted estate’
  • There’s no IHT to pay – you can check this here
  • There is no other reason listed that applies, including gifts paid into trust – the full list can be found here

Take sensible steps for your own IHT planning

More and more people are having to pay IHT; latest HMRC figures show IHT receipts for the period April 2021 to December 2021 to be £4.6bn, which is a £600m increase on the same period in 20201. IHT planning is a complicated subject, but sensible financial planning can help to reduce the amount of IHT your beneficiaries will have to pay and safeguard your wealth for the future. We can help – please get in touch.

1 HMRC 2022

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from taxation, are subject to change. The Financial Conduct Authority does not regulate tax planning.