01 December 2021
Will HMRC’s Inheritance Tax tool replace the value of professional advice?
Earlier this year HMRC announced they would be introducing a new online tool to help individuals better understand their Inheritance Tax (IHT) liabilities. The intricate web of IHT rules remain something of an unknown for many people, and understandably many people can not find the time to read HMRC’s 92-page IHT400 guide.
Recent statistics show that more than half of those over the age of 55 are unaware of how IHT is calculated, and just under a third haven’t checked if their estate is liable. Couple this with the news that receipts to the Treasury from IHT are on the rise (up 35% between April-August year on year), and it is clear there is a gap in terms awareness and forward planning.
Whilst it is great to see that HMRC have launched new IHT tool to help combat misunderstandings, whether or not the tool will replace the need for professional advice is up for debate…
What is the IHT tool?
The free IHT tool has been launched by HMRC with the aim of helping individuals understand whether they need to pay the tax, and which forms they will need to complete if they are liable.
Users enter an estimated value of all their assets and if the number exceeds the IHT threshold, they will then be directed to further information on the ways in which they can reduce their liability and guidance on probate.
Even though the tool will provide an extra layer of guidance which will help to increase awareness and understanding of IHT, it’s not a calculator and should only be used for general guidance.
The value of consulting an advisor
IHT is a complex area of tax, so the value of having a professional advisor to consult can’t be underestimated and should in no way be compared to the IHT tool.
A qualified advisor will take a holistic approach to reviewing your IHT exposure and will be able to assess whether you are able to mitigate this through the use of statutory reliefs including, but not limited to:
- Business property relief which is one of the most valuable IHT reliefs but which may not in all circumstances reduce the value of the transfer of business interests in full.
- Charitable donations of either cash or assets being left in your will to a charity which may reduce the rate of IHT payable by your estate.
- Lifetime Gifts including money, property and possessions. There are many different ways to make gifts in an IHT manner, but care should be given to consider whether other tax charges could apply.
We’d always recommend considering your legal standpoint when it comes to IHT too, with respect to wills and power of attorney. Having a joined up approach from a tax and legal perspective will place you in a much stronger position when it comes to IHT planning.
Helping you navigate IHT
Whether it’s calculating your liability based on your assets, assessing your eligibility for relief or helping you to forward plan, our team of private client experts can help take the pressure off your shoulders when it comes to IHT.
