Knowing about Inheritance Tax is imperative if you want to avoid unnecessary penalties. In fact, just last year, grieving families faced a startling spike in inheritance tax penalties, as HMRC garnered a staggering £2.28 million in fines.
This marks a sharp 34% surge from the previous year, revealed through a Freedom of Information request. Astonishingly, these figures illustrate over a 50% surge in inheritance tax penalties over two years, as per HMRC statistics.
Surprising Rise Amidst Increasing Tax Liability
The penalty surge coincides with a growing inheritance tax liability, affecting more estates. In the last year, 4% of estates dealt with inheritance tax, averaging a substantial £214,000 bill.
Inheritance tax revenue hit a record-breaking £5.76 billion in 2022-23, a remarkable 16% increase in just a year. Projections indicate it could hit £8 billion by 2028.
Penalty Levels and Growing Complexities
Penalties vary based on the reason behind the unpaid tax. For errors due to a lack of 'reasonable care', the penalty can reach 30% of the additional tax owed. Deliberate errors can incur a staggering 70% penalty, while 'deliberate and concealed' errors can lead to a 100% penalty.
Experts warn that the intricate nature of inheritance tax is tripping up more individuals, resulting in higher penalties. Families often underestimate asset values or omit them from tax returns. You can easily avoid having to pay Inheritance tax if you know just the right tips and secrets, making it easier to transfer your estate to your children.
Penalty Trends: A Closer Look
In recent years, the landscape of inheritance tax penalties has experienced notable shifts. Delving into the data reveals a clear pattern:
This table underscores the progressive rise in inheritance tax penalties, reflecting the increasing complexities families face in navigating this intricate domain.
Unforeseen Challenges and Legal Avenues
Undervaluing property and assets, coupled with ignorance of gift inclusion within seven years of the deceased's passing, contributes to rising penalties. As such, it is very important to make a will before the passing, as it can help with avoiding inheritance tax.
Experts emphasise the need for 'reasonable care' in valuing assets. HMRC's ability to cross-reference data from sources like land registry sales empowers them to scrutinise returns.
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