Should I be worried about inheritance tax?
There has been a lot of discussion recently about the future of Inheritance Tax (IHT).
Will it be abolished?
Early in June 2023, a number of Conservative MPs wrote an open letter to the Prime Minister Rishi Sunak arguing that the tax should be abolished. Just recently, former Prime Minister Liz Truss said that she and her then Chancellor Kwasi Kwarteng were planning to cancel it in their next budget.
There have been death duties, or similar taxes, in the UK tax system going back to at least 1694, later consolidated in the Finance Act of 1894 with Estate Duty and most recently set out in the Inheritance Tax Act 1984. Different countries around the world address it in different ways. Whether or not IHT is abolished here is, of course, something we just don’t know. It raises just over £7 billion per year for the Treasury and, as far as we know, there are no current, official plans for this to be stopped.
It is probably best for the time being to assume that IHT is going to stick around and plan accordingly.
It is important to get professional advice to make sure that your estate is structured efficiently for tax.
Should I be worried?
Roughly speaking, if you are single and your assets on death are worth more than £325,000, then this may be something you need to consider. If you have children and you are leaving them your home, then IHT may not be an issue until your estate reaches £500,000.
If you are a married couple, then your combined estates would need to be above £650,000 before you need to worry about it, or indeed over £1million if you have children to whom you are leaving your home.
There are of course more details that would need to be considered in a specific case.
If I think IHT might apply, where do I start to plan?
Here are three areas that it is worth considering and getting professional advice on:-
- Take a look at the assets you have. There are reliefs available for business or agricultural assets or interests. If so, then it is really important to get advice to both maximise the reliefs and also to make sure your Wills are structured in way to ensure they are not wasted.
- Pay attention to family history. It is important to make sure your professional adviser has a good understanding of your family background and history. It is possible that if one or both members of a couple has been widowed before, then there is more than one nil rate band amount available to transfer. However, you need to make sure that the Wills are structured carefully so that the possibility of three nil rate bands overall could be applicable. Without this, you may be limited to only two out of the three.
- Check your Wills. With the new rules for the residence nil rate band, it is important to ensure that there is nothing in the Wills that prevent this from applying, such as trusts with ongoing powers of appointment or property being left to non-qualifying beneficiaries, such as siblings or nieces and nephews where the relief would not apply.
There are lots of different factors that will apply to arranging your affairs tax efficiently for IHT and whilst 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.
How can our team of solicitors help you with your future planning?
If you have any questions or you 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
