What is happening to Inheritance Tax after the Autumn Statement?
- In Chancellor Jeremy Hunt’s recent Autumn Statement 2023 there was no mention of inheritance tax (IHT).
- There had been some speculation that it may be reformed, possibly with a reduction in the tax rate, which is currently 40% in most cases, but in the end nothing happened.
- It has been suggested that he may be leaving any announcement until the Spring Budget or possibly a General Election campaign later on. For the time being though, there is no change, so it’s important to take stock and get some advice on your estate.
- The basics are that a person’s estate is taxable to 40% of the capital value at the date of death, although everyone is entitled to a nil rate band of £325,000. If they have a property that is their home which they leave straight to lineal descendants after death, then they may qualify for the residence nil rate band, which is a further £175,000.
- For a married couple, these can also be transferred to the second person’s estate and so a UK-domiciled married couple may enjoy up to £1 million of nil rates before IHT is charged on anything above those at the 40% rate.
- Given that there has been little change in IHT in recent years, despite the talk around this topic, it is really important for clients to give some careful consideration and take professional advice about their current IHT position.
- There are ways to mitigate this liability during one’s lifetime principally through making gifts to others or owning assets that would enjoy relief. Careful legal advice and financial planning advice are key to making sure that this works as an overall plan for you.
- It is also especially important to make sure the Will is drafted correctly, so that for example in particular the residence nil rate band is fully applicable where possible. Some common provisions in Wills can adversely impact the availability of this relief.
- It is also possible to enjoy a lower rate of IHT at 36% if certain criteria are met in giving roughly 10% of the estate to charity and again careful advice and Will drafting are important.
- There are lots of different factors that will apply to arranging your affairs tax efficiently for IHT and while it is still on the statute book, many of the above issues will require careful, bespoke professional advice on your circumstances and that is something we can certainly assist with.
- If you have any questions or would like to explore any of these issues about your Will further, then please contact Richard Guy at Gotelee Solicitors LLP at 19 Deben Mill Business Centre, Old Maltings Approach, Woodbridge, Suffolk IP12 1BL Tel: 01394 388 605 and email: richard.guy@gotelee.co.uk
