Inheritance Tax (IHT) is a levy payable on the value of an estate above a particular threshold – usually £325,000 – of a person who has passed away. The tax is not well-liked amongst Britons, with many loathed to pay the levy – however, one expert has said more people will have to consider it. Express.co.uk spoke exclusively to Makala Green, chartered financial planner and founder of Green Wealth Planning, who provided further insight.
Ms Green analysed Inheritance Tax, a particularly discussed topic recently as many people look towards potential changes in the Budget.
However, the financial planner highlighted there have already been alterations which appear to drag more Britons into a tax net.
She said: “In the last Budget, the Chancellor fixed the nil-rate band at £325,000 until 2026 – and that is a decision which could affect a lot of people.
“However, he may not wish to do anything particularly drastic in the upcoming Budget, and could just make slight changes.
“It’s because of decisions like this, that we are now seeing more and more people falling into that bracket of having to pay more Inheritance Tax.
“Property prices are rising, and the nil-rate band has remained the same for so many years now.
“Fixing it until 2026 means I can only see that Inheritance Tax will increase from a Government point of view in the coming years.”
Increasing numbers of people will now have to consider Inheritance Tax, when perhaps they may not have even heard of the levy in the past.
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This could have the potential to prove dangerous for a tax bill if people fail to take action, it has been highlighted.
Ms Green explained: “I call it the hidden wealth bracket. There are plenty of people who would never classify themselves as wealthy that are being caught by Inheritance Tax.
“Once upon a time, it was a tax for the rich and wealthy – at one point – but because of the lack of change with the nil-rate band, this contributes towards more people being affected.
“Property prices have a huge effect, and because these have risen so sharply for so many people over the years, they are now in this wealth bracket.
“It wasn’t something working-class people generally needed to have to plan for in the past. People no longer have to be wealthy to pay Inheritance Tax, and this could prove a particular shock.”
Ms Green also highlighted how Inheritance Tax is likely to be new to many people, who could be unsure as to how the system works.
While the Government website does offer some form of guidance as to what the tax entails and who will be required to pay, Ms Green said further steps will need to be taken.
To plan, she said, is the best course of action, and she encouraged people to “factor in Inheritance Tax” when looking towards their future.
IHT was once famously described as a “voluntary levy paid by those who distrust their heirs more than they like the Revenue” by former Chancellor Roy Jenkins.
While changes to the tax system have taken place since, certain elements of this statement do continue to ring true.
Indeed, according to Ms Green, IHT is a voluntary tax, meaning Britons can take certain steps to avoid it.
She concluded: “Inheritance Tax, at the end of the day, is a voluntary tax as many people correctly identify.”
“This means it can be avoided, at least to a certain extent and there are ways to go about doing so.
“To avoid Inheritance Tax to a degree, people should be undertaking tax planning and thinking ahead.”
When it comes to Inheritance Tax, people are encouraged to speak to a financial adviser as these experts often have the knowledge to assist someone in their personal circumstances.
There are also tools online such as Money Helper and CitizensAdvice, designed to offer guidance.
Follow Makala Green on Instagram at @TheWealthCheck and check out her website www.makalagreen.comLinkInternet Explorer Channel Network