Family is very much at the forefront of the Essex community, and you want to ensure that they are looked after during your lifetime and beyond.
Your estate is your legacy. With a well-thought-out estate plan, it can reflect the way you want your assets to be managed and passed on.
You don’t want that to be affected by an unwanted Inheritance Tax (IHT) bill why is precisely why you should put preventative measures in place to protect your estate and ensure your beneficiaries receive their full inheritance.
This is particularly relevant now, as HM Revenue and Customs (HMRC) opened 41per cent more IHT investigations in 2024/25 than in the previous year.
Why is HMRC opening more investigations?
The main factors behind the increased number of investigations are the continued freeze extensions on IHT. Frozen since the 2020/21 and extended until at least 2030, this is causing more estates to become liable and surpass the £325,000 threshold.
The numbers behind it would suggest it’s having an impact. According to figures obtained in a freedom of information request by NFU Mutual, 3,961 investigations were opened during the 2024/25 tax year, a sharp 41 per cent increase from 2,807 in the previous year.
The number of investigations is expected to rise with the Government announcing further IHT changes that will impact estates so it’s important you have preventative measures in place.
What Inheritance Tax changes are coming into effect?
As you attempt to manage your estate and ensure its value is protected, it’s important to bear in mind the upcoming IHT changes that could impact your estate.
As discussed earlier, an extended freeze on the IHT threshold rates and reliefs until 2030 has been confirmed meaning the £325,000 threshold will stay in place for the next five years.
You also need to be aware of other proposed changes. From April 2027, your unused pension pots and death benefits will be classed as part of your estate.
Including unused pension pots within an estate increases the value, pushing them closer to or over the IHT threshold. With the figures to be included as part of your estate, this increases your chances of passing the £325,000 IHT nil-rate band.
Should this happen, your estate will be liable to pay an IHT bill. Preparation is key and its essential you put measures in place to protect your estate.
At this stage, it’s unclear if any further IHT changes are planned but it is an avenue the Government have utilised to try and balance its books so its important to be prepared.
What can I do to protect my estate?
It is always best to act fast and check over all the details and update your plan regularly to protect your assets and the value of your estate.
The are ways you can protect your estate including updating your Will, utilising trusts, releasing equity from your property and even distributing gifts or cash sums early.
Updating your Will ensures each beneficiary you want is included as well as what you want to bequeath and how you want your estate to be managed.
Utilising trusts can help manage potential IHT bills. Putting assets into a trust, takes them outside your estate. However, different trusts have different tax implications so it’s important to explore the market before choosing the right trust.
You may also consider releasing equity from your property, but you need to be a certain age to do this given that there are different forms of equity release. For avoiding and mitigating IHT, it does help as this drastically reduces the value of your estate.
However, you would need to remove the property from your Will as you cannot bequeath it and as your estate reduces in value, the value of what you give your beneficiaries also decreases.
You may choose to give gifts during your lifetime to avoid them being classed as part of your estate. This would help keep the value of your estate down and reduce the chances of you needing to pay an IHT bill.
Is support available to help me put measures in place?
Given the increased number of investigations and the continued freeze on the IHT nil-rate band, you should look at updating your estate and putting measures in place to protect the value.
At Palmers, we have a dedicated team of experts on available to help you with all estate management and planning queries. We can help advise and support you to ensure your estate reflects your wishes and helps mitigate potential IHT challenges.
Don’t let Inheritance Tax affect your beneficiaries, get in touch with us to update and protect your estate.