Doctors warned not to ignore inheritance tax
Record receipts for taxpayers’ ‘gifts’ announced by HMRC
By Edie Bourne
Doctors have been urged to check that they have plans in place to address inheritance tax following a ‘record year’ for HM Revenue and Customs (HMRC).
The warning comes from specialist financial planners Cavendish Medical after it was announced that the tax paid on ‘gifts’ from loved ones has increased by more than 153% since 2011.
A total of £256m was taken by the taxman in inheritance payments on gifts in the 2020-21 tax year.
Individuals can gift funds to loved ones to reduce the size of their estate, but must survive for another seven years to avoid inheritance tax being due – this is known as the ‘seven-year rule’.
If the person dies within seven years, the gift will be included in the estate and inheritance tax may be charged on the sum.
Inheritance tax has also been in the news recently as rumours suggest it could be a useful political tool for the Government looking to increase votes in an election year.
There was much speculation before last year’s Autumn Statement that inheritance tax would be a target for Chancellor Jeremy Hunt. However, the forecasts proved unfounded and the nil-rate band remains frozen at £325,000 until 2028, despite being in place since 2008.
George Uglow of Cavendish Medical
George Uglow, chartered financial planner at Cavendish Medical, told Independent Practitioner Today: ‘We often meet very busy doctors who do not have a valid estate plan in place to deal with inheritance tax.
‘Sometimes they have drafted a will but have not necessarily considered how to protect their assets or considered the tax implications. This could leave their loved ones facing potentially substantial payments in the future.
‘With high inflation, soaring property prices and a nil-rate band remaining at the same level for 16 years, more estates than ever are likely to face an inheritance tax bill.
‘While there are number of tools and solutions available to protect against inheritance tax, there are also lots of important considerations, such as affordability and sustainability, before taking action.’
He said gifting could be a simple and effective tool to reduce estates, but advice should be sought before restricting access to or giving away funds that might be required in the future.
The official figures also showed that general inheritance tax receipts reached £4.6bn for April to October in 2023, a significant increase of £0.5bn compared to the same period the year before.
Mr Uglow warned: ‘Inheritance tax is an important topic to discuss for any senior doctor – having worked hard to accrue assets, most want to ensure this can be passed to the next generation and beyond.
‘Assets subject to inheritance tax are charged at 40% – a staggering amount for family members to settle when there could be options to mitigate this. Please do arrange an estate plan with an expert rather than pay more tax unnecessarily.’