“This time next year Rodney, we’ll be millionaires”
Del Boy isn’t alone in his wealth as according to a piece of research undertaken by the Times one in five people aged 65 and over have wealth of over £1,000,000.
The staggering amount of people worth over seven figures shows how the increase in wealth of over 65s means more of that particular demographic are subject to Inheritance Tax (IHT). The most surprising aspect is the stalemate of the Nil Rate Band, which is the amount each individual has to give away free of IHT. The Nil Rate Band inheritance tax allowance is currently £325,000 and has been that amount since 2009.
The increase in wealth is majorly due to the rise in property prices over the last decade with contributions from increased investments and pension funds. One way the Government has tried to combat the spiralling property prices is through the introduction of the Residence Nil Rate Band (RNRB) allowance which came in to force in April 2017. The RNRB is an extra relief (currently £125,000 and rising to £175,000 by 2020/21) available if the deceased’s residential interest in a property is closely inherited by direct descendants; this means that the effective IHT threshold for married couples could be up to £1m by 6 April 2020. This allowance does have many limitations though and, for example, will not be available in full to those with estates over £2m.
For detailed advice on IHT allowances, IHT planning and making sure your Wills are up to date please contact Alexandra Gordon.