A wealth management organisation has raised the spectre that some families may end up overpaying inheritance tax.
And with property wealth being a major contributor to IHT liabilities, there is the possibility that landlord families could be amongst those accidentally overpaying.
HMRC says inheritance tax receipts hit £2.6 billion from April to July 2023; this is £237m or 10 per cent higher than the same period last tax year.
Years of house price increases, soaring inflation, and tax freezes have pushed an increasing number of families that would not consider themselves to be wealthy above the threshold for inheritance tax.
But Wealth Club says that with property prices falling more recently, many families could find they’ve overpaid.
The club says that if properties or shares were valued for inheritance tax purposes in late 2022 or early 2023, but are only now being sold, there’s a strong chance you’ll be selling them for the less than the value on which inheritance tax was paid.
Nicholas Hyett, Investment Manager at Wealth Club, says: “HMRC continues to see its inflows increase, month-after-month and year-after-year. But as house prices start to fall, its possible some beneficiaries have paid more inheritance tax than they really should.”
He advises that there are ways to claw back overpaid IHT.
These include the ‘Loss on sale relief’ IHT35 form, used to claim back losses on the sale of qualifying investments within 12 months of the date of death; and the IHT38 form, which allows you to claim back money on the sale of a property or land, to ensure beneficiaries are paying tax on the actual sale price and not its valuation at the time of death.
Lengthy delays in processing probate are making it difficult for people to claim these reliefs, and there have been calls for ministers to extend the claims window for IHT35 forms in particular.
Wealth Club suggests concerned about inheritance tax should also consider giving modest sums of money away early; investing in companies that qualify for Business Relief; or putting money in an AIM ISA.