She says: “Despite the fact that each year only 25,000 estates actually pay the tax, IHT increasingly falls on the middle class, with estates worth £10m or more paying an effective 10 per cent tax rate, compared to a 20 per cent tax for those with smaller estates of £2m to £3m.
“This is down to the fact that the wealthiest families get professional advice to make full use of the allowances, while those with smaller estates do not – highlighting the benefit of planning for [IHT].”
While clients are entitled to pass on assets of up to £325,000 free of tax, married couples and registered civil partners, can share their thresholds, transferring the unused element of their IHT allowance to the surviving spouse when they die, effectively doubling up the relief, notes Philip Whitcomb, partner and head of rural private clients at Moore Blatch.
He adds: “In addition, you have the residence nil-rate band which is rising in increments up to £175,000 in April 2020.
“There are strict rules which you need to follow in order to claim the residence nil rate band, including leaving your property or an element of your property to your children or their descendants, and there are also tapering provisions if your estate is worth over £2m.”
Indeed, according to Ms Crookes, the new residence nil-rate band is “complicated and only available where an individual is leaving their home to their direct descendant(s) and tapers away where an estate value exceeds £2m”.
When to start planning
Anyone who looks likely to be liable to pay the tax should start planning as early as possible, according to Ms Suter.
She says: “The seven-year taper means that anyone who wants to gift money benefits from doing so sooner rather than later, and potentially avoiding paying IHT if they die within seven years of making the gift.
“That said, with the rising cost of care, people need to ensure that they aren’t giving away money that they may potentially need later in life.”
She adds: “While it is nice to be able to leave a nest egg for your children, family or friends, you do not want todo it at the expense of your own future.”
Many people leave planning for IHT too late, according to Mr Whitcomb.
He says: “The clear message is: the sooner you start the better. It is much more complicated and your options become limited the later you leave it.”
He continues: “A lot of people wait until death before passing on the wealth through their wills. However, it can be more tax-efficient to gift money and other assets while you are still alive.
