Inheritance tax – Clever Splitter http://cleversplitter.com/ Thu, 16 Jun 2022 01:04:58 +0000 en-US hourly 1 https://wordpress.org/?v=5.9.3 https://cleversplitter.com/wp-content/uploads/2021/07/icon-2021-07-28T170948.334-150x150.png Inheritance tax – Clever Splitter http://cleversplitter.com/ 32 32 Inheritance tax: your relatives can benefit from a reduced tax rate | Personal finance | Finance https://cleversplitter.com/inheritance-tax-your-relatives-can-benefit-from-a-reduced-tax-rate-personal-finance-finance/ Sun, 12 Jun 2022 23:01:00 +0000 https://cleversplitter.com/inheritance-tax-your-relatives-can-benefit-from-a-reduced-tax-rate-personal-finance-finance/ Currently the tax free abatement is £325,000 and is known as the zero rate bracket and if the value of an estate is less than this then no tax is paid on it. If the value is above the threshold, the standard tax rate is 40%, unless the assets are bequeathed to charity. Gifts and […]]]>

Currently the tax free abatement is £325,000 and is known as the zero rate bracket and if the value of an estate is less than this then no tax is paid on it. If the value is above the threshold, the standard tax rate is 40%, unless the assets are bequeathed to charity. Gifts and donations to qualifying charities are exempt from estate tax and if a person leaves 10% or more of their net estate to charity, the rate of estate tax payable is reduced at 36%.

Along with this, the value of the charitable donations themselves are deducted before the imposition of inheritance tax.

This means that, in some scenarios, giving more to charity could actually lower a person’s inheritance tax bill and may mean that people have a little more to leave to their beneficiaries overall.

However, this depends on the initial value of the estate, as well as the size of the gift.

According to the rules, donations to charities are exempt as long as they are given directly to a charity which they qualify as a charity under UK law or which is established in the EU or another specified country .

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The charity must also be regulated in the country where it was established and it must be managed by “competent and competent persons”.

Choices of gifts a person can leave to charity include a pecuniary inheritance, which is a fixed amount of cash, or a specific inheritance which is a particular item, such as property or shares.

A person can also leave a residual inheritance which is all or part of what remains in the estate after everything else has been paid, such as other gifts, taxes and expenses.

The advice for people donating to charity is to clearly state their wishes in their will and include details such as the charity’s name, address and registration number.

DO NOT MISS :

Claire Roberts, tax associate at accounting firm Moore Kingston Smith, said: “The choice to donate to charity in life or death depends on personal circumstances.

“Lifetime gifts qualify for Gift Aid and have the added benefit of reducing the value of your estate for IHT purposes.

“However, leaving charitable donations in your will could give you the assurance that you are helping a good cause while still having sufficient funds to enjoy in your retirement.”

Ms Roberts pointed out that as Chancellor Rishi Sunak has frozen the threshold at £325,000 until April 2026 and the cost of assets is rising, more and more people will be drawn into the inheritance net.

Ms Roberts added: ‘The generous IHT breaks on offer for charitable giving should not be overlooked when writing wills and planning for the future.’

According to projections by the Office for Budget Responsibility, the government will collect £37billion in inheritance tax over the next five years.

This is a 36% increase on the last five years when £27.2bn was raised.

Five years ago inheritance tax rose by an annual amount of £4.8 billion, five years from now it is estimated to be £8.3 billion.

There are other ways to reduce the level of inheritance tax a person pays. These include giving away money and assets while a person is still alive or placing assets in a trust and buying life insurance.

Also, if a person leaves anything above the threshold of their estate to their spouse, civil partner, or amateur sports club, the inheritance is generally not paid.

Being married or in a civil partnership certainly helps pay inheritance tax as if a person had an estate worth less than the threshold then on death the unused threshold can be added to the surviving partner’s threshold upon his death.

This means their threshold could rise to a maximum of £950,000.

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Make your wealth more efficient https://cleversplitter.com/make-your-wealth-more-efficient/ Fri, 27 May 2022 10:10:49 +0000 https://cleversplitter.com/make-your-wealth-more-efficient/ In 2018/19, only 3.7% of deaths in the UK gave rise to an Inheritance Tax (IHT) charge. Indeed, as a private client lawyer, I have taken great joy in telling clients that their estates are unlikely to be subject to this most hated tax – but such occasions are becoming increasingly rare. HMRC collected £6.054 […]]]>

In 2018/19, only 3.7% of deaths in the UK gave rise to an Inheritance Tax (IHT) charge. Indeed, as a private client lawyer, I have taken great joy in telling clients that their estates are unlikely to be subject to this most hated tax – but such occasions are becoming increasingly rare.

HMRC collected £6.054 billion in IHT revenue in 2021/22 and revenue is expected to reach £8.3 billion by 2026, capturing over 200,000 people over the next four years.

The IHT rescuers did not catch up rising real estate prices even with the introduction of the Residence Nil Rate Band (RNRB). It is a convoluted and convoluted relief which nevertheless, together with the Nil Rate Band (NRB), lifts an estate worth less than £1million off the IHT net for a married couple. It has of course been unnecessary that the NRB has been frozen since 2009 at £325,000.

So how can you avoid paying the IHT as the net gets wider and wider?

The answer is forward planning. It’s never too early to think about how to make your estate more tax-efficient.

  1. Reduce your wealth through donations

An outright gift is one of the easiest ways to reduce an estate, for example, giving an adult child or grandchild a deposit for a house.

These donations are potentially exempt transfers (known as PET) and therefore may be charged to IHT if you die within seven years of the donation. This is called the “seven-year clock”.

On donations, each person can give £3,000 a year, which is immediately exempt and not on the seven-year clock.

You can carry over the allowance for a year if it has not been used. You can also donate up to £250 to an unlimited number of people each year.

It is also possible to make regular donations from income that is immediately exempt from IHT, although it is important to keep meticulous records to help your executors claim this relief.

If you want to donate money or assets but still want to retain some control, a transfer into a trust may be more appropriate, although there are limits to the amount that can be placed in trust before a tax charge does not arise.

There are other structures that can also be useful. If you have a large amount of cash available, a family investment company may be an appropriate vehicle, for example.

It is important to consider the capital gains tax implications of any donation.

  1. Make use of waivers

Transfers between married couples and civil partners, both living and upon death, are exempt from IHT due to the spousal exemption (with some rare exceptions).

Contrary to popular belief, there is no exemption from IHT between unmarried couples, so if you are not married to your partner or in a civil partnership with him, your estate may be subject to IHT when you will bequeath your estate to him and it will not be possible to transfer your NRB or RNRB to them so that they can use it upon their death.

Each person has an NRB of £325,000 which can be passed on without IHT on death. This can be reduced by donations and in-trust transfers caught up by the seven-year clock.

For those who pass assets to direct descendants on death, an additional exempt amount of £175,000 is available (the RNRB).

Both allowances are transferable between married couples, so if a person leaves their estate to their spouse or civil partner, these allowances will not be used due to the spousal exemption, but can then be used on the second death.

This means that up to £1million can be passed on to married couples without IHT if all four allowances are fully available. Although the RNRB is only fully available for estates worth less than £2 million, steps can be taken to bring the estate below this threshold.

Other exceptions that may be much more useful include exemptions on commercial property (Business Relief) and agricultural property (Agricultural Relief).

Certain business assets are exempt from IHT at a rate of 100%, allowing a business to be passed between generations without having to sell assets to fund an IHT bill. These assets need only have been held for two years prior to death.

  1. Make sure your Will is tax efficient

Not all wills will help save IHT, but having a Will be drafted by a lawyer will ensure that the IHT implications of the will structure are properly considered and dovetail perfectly with the lifetime estate planning you have in place.

For example, a lawyer can advise you on the most tax-efficient way to support an unmarried partner or how to preserve business assistance that would otherwise be lost if the entire estate was left to a spouse or civil partner.

Of course, not every decision you make about your Will is tax-driven, and it’s more important that your Will ensure that your estate is given to those you wish to benefit, but a lawyer can ensure that this is done in the most tax efficient way. way.

  1. Other development measures

It is also possible to reduce your IHT exposure on assets that you may not have even considered. For example, naming a trust to receive your in-service death benefits from your employer or placing your life insurance policy in trust may avoid inflating the estate of your spouse, civil partner, or partner for IHT purposes, but funds remain entirely at their disposal if they are needed.

Another underused measure is the use of deeds of alteration upon receipt of an inheritance. If you already have an estate that may be subject to IHT, it is a good idea to remove the inheritance from your estate for IHT purposes.

However, if you use an amending deed to create a discretionary trust, you will still be able to benefit from the inheritance in the future.

If you are concerned that your estate may be subject to IHT upon your death or the death of your partner, it is important to seek legal advice to reduce your estate’s exposure to this tax.

If you already have a financial advisor or accountant, a lawyer can work with your current advisors to ensure your estate is tax efficient.

Sarah Nettleship is an attorney at Thomson Snell & Passmore

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Inheritance Tax Shock: Thousands at Risk of Unexpected Bill – ‘May Have to Sell Their Home’ | Personal finance | Finance https://cleversplitter.com/inheritance-tax-shock-thousands-at-risk-of-unexpected-bill-may-have-to-sell-their-home-personal-finance-finance/ Fri, 27 May 2022 05:01:00 +0000 https://cleversplitter.com/inheritance-tax-shock-thousands-at-risk-of-unexpected-bill-may-have-to-sell-their-home-personal-finance-finance/ Over 70s choose to cohabit with their partner rather than enter into a real marriage or civil partnership. While it might seem like all the romance without any of the paperwork of a traditional relationship at this age, it could have disastrous consequences if either of them dies. Since 2002, the number of people over […]]]>

Over 70s choose to cohabit with their partner rather than enter into a real marriage or civil partnership. While it might seem like all the romance without any of the paperwork of a traditional relationship at this age, it could have disastrous consequences if either of them dies.

Since 2002, the number of people over 70 cohabiting with their partner has increased by 288%.

In 2002, in England and Wales, 45,066 people over the age of 70 cohabited with their partner without being married or in a PACS.

In 2020, that figure was a staggering 175,028.

Undeniably, this proves a change in expectations of what a relationship can look like. However, many couples may not fully understand what they are risking.

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Marriage in general is in decline, with other lifestyles like cohabitation slowly moving up the popularity scale.

However, in a somewhat modern society, some rules and regulations are now lacking in this regard, with Britons suffering the consequences if they are not careful.

Ellie Sawkins, Investment Analyst at Wealth Club, commented: “People over 65 are marrying and divorcing in greater numbers than ever before, creating an entire generation of money splicers and spreaders. But this growing demographic can unwittingly endanger the homes of their partners.

“The households of unmarried couples are subject to inheritance tax upon the death of one of the partners, leaving their share in a common dwelling to the surviving partner. This tax debt would be due within six months, and so for many it could mean that in addition to coping with the loss of a loved one, they are forced to sell their home, and quickly. A quick sale almost inevitably means having to reduce the price of the property, which is a double whammy for those who are already mourning the loss of a loved one. Cohabitants need to think seriously about how they approach this problem.

“While marriage and PACS are not suitable for everyone, they can offer significant inheritance tax advantages. There are also dangers. Marrying without a will could result in your children, possibly from a previous relationship, being deprived of the inheritance you intended to leave them, since your assets will pass to your new partner first, then possibly to their children in the event of marriage. their death. It is important that you clearly state your intentions in a will.

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There are many ways to avoid a hefty inheritance tax bill, one of which is to use your spouse or civil partner as the sole heir.

However, without entering into a real marriage or civil partnership, this method, and others like it, will be useless.

Ben Alcock, Independent Financial Adviser at Continuum, said: “While there may be social and other obligations, without a formal contract of marriage or civil partnership, there are few automatic rights to money or even to things like a shared house.

“If either partner owns property in his or her name alone, the surviving partner has no clear right of ownership or habitation if the owner dies.”

While this certainly seems outdated and unreasonable, in the eyes of inheritance law, a blood relative who hasn’t spoken to the deceased for decades would have more rights to the estate than a common law spouse.

Even the taxman might claim more legal rights to the estate than a much-loved partner.

However, Mr Alcock noted that this was not an ultimatum to force couples into marriage or enter into a civil partnership and that there were other things that could be done.

For example, having a house in common ownership when first purchased can ensure that neither of them becomes homeless in the worst-case scenario.

However, this will not erase the burden of inheritance tax.

Mr Alcock continued: ‘When one of the partners of an unmarried couple dies, their estate becomes liable for the IHT on any assets above the IHT allowance. Worse still, the IHT will be payable before the assets can be transferred, potentially leaving the estate with a heavy tax bill to pay. The surviving partner may inherit less than expected. They may have to sell the house they shared to pay for it.

Another way to avoid this quiet problem is to properly plan for succession.

Mr. Alcock explained: “Estate planning is a complex area and requires in-depth knowledge of taxation and many other areas where rules and regulations have accumulated. Independent financial advisory firms such as Continuum can provide the expertise you need and work with other professionals, such as your lawyer and accountant, to get the outcome you and those you leave behind really want.

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Inheritance tax revenue hits £0.5bn in April, up £10m from same period a year – London Business News https://cleversplitter.com/inheritance-tax-revenue-hits-0-5bn-in-april-up-10m-from-same-period-a-year-london-business-news/ Tue, 24 May 2022 08:08:22 +0000 https://cleversplitter.com/inheritance-tax-revenue-hits-0-5bn-in-april-up-10m-from-same-period-a-year-london-business-news/ Inheritance tax revenue jumped to £0.5billion in April 2022 according to data released today by HMRC. This is 10 million pounds more than the same period last year. Freezing inheritance thresholds until 2026, high inflation and rising house prices are causing more and more estates to be pushed above the threshold. There is a tax-free […]]]>

Inheritance tax revenue jumped to £0.5billion in April 2022 according to data released today by HMRC. This is 10 million pounds more than the same period last year.

Freezing inheritance thresholds until 2026, high inflation and rising house prices are causing more and more estates to be pushed above the threshold.

There is a tax-free inheritance allowance called a zero bracket that applies to everyone. Each person can pass on up to £325,000 from their estate without having to pay IHT.

Any amount over £325,000 could be subject to inheritance tax of up to 40%. The zero rate band has remained at the same level since April 2011, even though inflation has increased by 43% during this period and the average house price has increased by 66%.

Some homeowners may also be eligible for a ‘zero rate residency band’ of up to £175,000 on top of the zero rate band. However, this only applies when you pass on your principal residence to a direct descendant.

The “zero-rate residency band” was introduced in 2017 and grew every year with inflation until last year when the Chancellor announced it would be frozen until 2026.

Alex Davies, CEO and Founder of Wealth Club, said: “Inheritance tax really is the gift that keeps on giving – at least to the Treasury. With the pace of house price growth still near double digits, it’s no wonder so many households are being pushed above the IHT threshold. The average family hit by inheritance tax is now thought to face an average tax bill of £200,000.

There are perfectly legal and legitimate ways to reduce your inheritance liability with a little careful and early tax planning. Writing a will in a way that you are obligated to review and resolve any issues your estate may face, and keeping it regularly updated to reflect any change of heart or circumstances should be a priority for everyone. , married or not.

Give money early. Gifts taken from regular income, which are not deemed to affect the standard of living of the donor, are exempt from inheritance tax on day one, as are some smaller gifts. Timing is key as you can give unlimited amounts, but it usually takes seven years to be completely free of inheritance tax. Of course, once you give the money, you lose control. If you need it in an emergency, that’s not an option.

Invest in businesses eligible for Business Property Relief. These are generally exempt from inheritance tax after two years. Investing in unlisted companies can be risky, however, unlike giving money, you are in control.

Invest in an AIM ISA. ISAs are not exempt from inheritance tax. When you die, your loved ones could lose 40% of your hard-earned money. ISA AIMs are a popular way around this problem. They are more risky but after two years they could be IHT free.

The homes of unmarried couples could be subject to inheritance tax on the death of one of the partners and any tax liability would be due within six months, forcing many people to sell their homes during their bereavement. Cohabitants need to think seriously about how they approach this problem. Although marriage is not for everyone, it can offer significant tax benefits and married couples can bequeath everything to their surviving spouse without having to pay inheritance tax.

And finally, whatever you do, be sure to make a will. If you don’t, the law will decide the distribution of your estate and it will certainly not be the most tax-efficient way.

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How can I minimize inheritance tax on my estate? https://cleversplitter.com/how-can-i-minimize-inheritance-tax-on-my-estate/ Mon, 16 May 2022 14:31:59 +0000 https://cleversplitter.com/how-can-i-minimize-inheritance-tax-on-my-estate/ I have a concerning and unfair Inheritance Tax (IHT) situation. I’m 90 and my daughter has given up a decent job to take care of me. I live in a house valued at around £1million, I own shares worth c. £1.6 million and have cash and bonds worth £400,000. My solicitor said the house should […]]]>

I have a concerning and unfair Inheritance Tax (IHT) situation. I’m 90 and my daughter has given up a decent job to take care of me. I live in a house valued at around £1million, I own shares worth c. £1.6 million and have cash and bonds worth £400,000. My solicitor said the house should be passed on tax free but my investments would be taxed at their value less £325,000 times 40%.

Currently I give £1,500 in total from my income each month to my two children. Brokers and lawyers told me not to transfer my company pension – that was the wrong thing to do. In hindsight, I should have put everything into a self-invested personal pension (Sipp).

I owe everything to my daughter who does so much for me and I don’t want her to pay so much tax. Can you help me to solve this riddle. I believe Australians do not pay inheritance tax.

I.W.

Julia Rosenbloom, Tax Partner at Tilney Smith & Williamson, responds:

Your question illustrates the complexity of IHT laws.

IHT is generally payable at a rate of 40% on the value of an individual’s estate on death, although this is subject to a number of rules which may reduce the amount payable.

If an estate passes to a spouse or civil partner, IHT is generally not payable. It is essentially deferred until the death of the survivor and passes the assets to other family members. You don’t say if you have a surviving spouse, but I assumed you were widowed. In this case, you may have your own ‘zero rate tranche’ of £325,000 which you can deduct from your estate, plus up to an additional £325,000 in respect of your deceased spouse, if the latter left the their entire estate to you upon their death (the “zero-rate transferable portion”). This could mean that up to £650,000 of your £3m estate is subject to 0% IHT, with only the balance of £2.35m being taxed at 40%: an IHT liability of 940,000 £.

An exception would be if you or your spouse made donations in the seven years prior to your death. In this case, the value of these gifts would be deducted from the combined zero rate bracket. You talk about monthly income donations. There is a specific exemption which means that these regular gifts must not encroach on the nil tranche, even if they are made within the seven years preceding the death, provided that these regular gifts leave the donor with sufficient income to finance the expenses of subsistence.

As for the home, the solicitor may have thought of the ‘zero-rate residency band’, which can potentially grant spouses an additional £350,000 exemption when primary residence passes to children. However, this is not available on domains of this size as it is phased out once a domain reaches the value of £2m.

Your comment on Australian tax law made me wonder if you are perhaps an Australian living in the UK? If so, you may not be domiciled in the UK (non-dom). Non-doms are generally only subject to UK IHT on their UK assets – their overseas assets are not affected. It looks like your estate consists of only UK assets in any case. But even if you hold assets outside the UK, if you have resided in the UK for at least 15 of the last 20 tax years, you are considered to be domiciled in the UK and your “Australian origin” does not matter. no IHT relevance. If you have been resident in the UK for less time you should take further advice as it may be possible to reduce exposure to IHT.

The other point to be addressed concerns pensions. It is correct that pensions are, for the most part, outside the scope of the IHT, so using non-retirement wealth to fund living expenses can be beneficial. However, you shouldn’t feel too bad as there is only a limited amount that can be contributed and held in most pensions without incurring tax charges. There are also limits on the assets that can be held by pensions.

If you want to mitigate the IHT, you can consider donating now, either in cash or in investments (careful consideration is required before donating the house). If you were to die within seven years of the donation, the beneficiary would be liable for IHT, so your age will need to be taken into account. However, if you survive at least three years, the rate of IHT payable on the donation decreases, depending on the length of survival. For example, if you survive between three and four years, the IHT would only be payable at a rate of 32% on the value of the donation, rather than the inevitable 40% if no donation is made. The rate then reduces to 24%, 16%, and 8% for four-year, five-year, and six-year survival, respectively. Note that if a given asset is at a gain, capital gains tax may be payable, so professional advice should be taken. You’ll also need to make sure you keep enough to fund your living expenses, as any gift must be “unconditional” to be effective.

You can also consider investing in assets that are exempt from IHT, such as shares listed on the Alternative Investment Market (Aim). Once these shares have been held for two years, they are eligible for commercial property relief, which may exempt them from IHT. However, these investments tend to be riskier, so you should seek professional advice before investing in them.

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Inheritance tax freeze – A new stealth tax? https://cleversplitter.com/inheritance-tax-freeze-a-new-stealth-tax/ Mon, 16 May 2022 13:04:59 +0000 https://cleversplitter.com/inheritance-tax-freeze-a-new-stealth-tax/ By Legal futures Partner Ampla Finance You may be surprised to learn that Inheritance Tax (IHT) has been frozen at £325,000 since 2009. This is a reduction from actual conditions and recent figures show it would have been more than £150,000 more if the threshold had increased in line with inflation. The bottom line is […]]]>

By Legal futures Partner Ampla Finance

You may be surprised to learn that Inheritance Tax (IHT) has been frozen at £325,000 since 2009. This is a reduction from actual conditions and recent figures show it would have been more than £150,000 more if the threshold had increased in line with inflation.

The bottom line is that such a freeze will hit middle-income families more, as they are taken by the IHT as real estate prices rise. And the threat is likely to increase thanks to Chancellor Rishi Sunak IHT zero rate now frozen at £325,000 until 2026. Families who are affected are urged to act as soon as possible to protect their assets from HM Revenue & Customs ( HMRC).

HMRC is already enjoying huge windfalls and raised a further £700m from the IHT between April 2021 and February 2022 – a huge 14% increase on the previous year to over £5.5bn sterling paid into the Treasury since 2009. In a move designed to boost revenue, Rishi Sunak also froze income tax, pension lifetime allowance and capital gains tax thresholds until April 2026 at least.

Freezing tax in this way is a stealth tax as it increases the amount HMRC receives each year without people realizing it. Personal tax expert Christine Cairns believes that if the IHT band threshold had followed inflation trends every year since 2009, it would have reached over £478,000. This is over £153,000, which could have been passed on to families tax-free and means a bereaved family paying IHT at 40 per cent, will pay an additional £61,231 to HMRC due to the freeze.

Ampla Finance - Inheritance Tax Reduction Image

Additionally, the Zero-Rated Principal Residence Threshold, which is a partial exemption that allows families to leave £175,000 of their home property to their children and grandchildren, has also been frozen until 2026. very real effect of eroding its value. . Christine Cairns said:

“The IHT freeze is just one example of how more and more middle to low income households will be pressured to pay more tax as prices rise.”

No wonder so many people are furious to see Sunak’s wife, Akshata Murty, trying to use her non-domiciled status to save millions in UK tax. Especially when everyone is taxed more.

By their very nature, stealth taxes escape most people because they don’t see a freeze as a real reduction in conditions. But that’s exactly what it is. And the reality is that the situation will get worse as inflation rises, with Halifax reporting that house prices have climbed 11% in the last twelve months alone.

With the average family home in the UK worth an estimated £282,000, the IHT bands remain the same, and that’s not expected to change for at least another four years. And while Sunak isn’t the first chancellor to use frozen tax breaks as a stealth tax, he appears to have taken it to a whole new level.

The unfortunate outcome for families who otherwise would not consider themselves wealthy are likely to be supported by the IHT, which was originally considered a tax on the extremely wealthy.

Mike Hodges, tax partner and head of Saffery Champness, the private wealth practice group, said the Treasury is raising billions of pounds in revenue ” quiet “, and, “The IHT freeze, is for all intents and purposes, a tax hike by any other name.”

However, there is hope. Families can reduce their tax exposure by planning carefully and making donations. Estate planning must now focus on passing assets to future generations during their lifetime, or placing assets in a trust so that they do not become part of an individual’s estate upon death.

That said, one should always exercise caution when considering such options. It is essential to ensure that assets are donated effectively for the purpose of removing them from someone’s estate for IHT reasons. Additionally, giving assets to family or placing them in a trust to mitigate the IHT can often trigger other unforeseen tax liabilities, such as capital gains tax.

In a classic chicken and egg situation, no end of UK estate is ‘locked in’ because the executor, who is most of the time responsible for paying the IHT, has no just don’t have the funds to pay the liability. Add to this that the executor is often not the beneficiary, the inability to pay inheritance tax means the whole process is suspended for those who may need to realize their inheritance sooner.

Andrew Shirtcliff, Director of Business Development at Ampla Finance, says:

“We understand the struggle third parties go through when navigating the domains with their customers. But there is a solution. Executor loans are available for those who have an IHT bill to pay when no provision has been made to cover the payment and for beneficiaries who wish to access up to 70 % of expected proceeds of an estate, even before probate is granted. .”

To learn more about partnering with Ampla Finance, visit https://ampla.finance/work-with-us-beneficiary-or-executor/, email andrew.Shirtcliff@amplafinance.com or call 0800 009 6590.

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thousands targeted by HMRC for underpayment https://cleversplitter.com/thousands-targeted-by-hmrc-for-underpayment/ Thu, 12 May 2022 07:00:00 +0000 https://cleversplitter.com/thousands-targeted-by-hmrc-for-underpayment/ Families believed to have been caught off guard by donation rules There are few taxes more universally hated in the UK than inheritance tax, which is why many families are taking proactive steps to reduce the amount their estates are likely to have to pay after their death. […]]]>

Families believed to have been caught off guard by donation rules




There are few taxes more universally hated in the UK than inheritance tax, which is why many families are taking proactive steps to reduce the amount their estates are likely to have to pay after their death.

Unfortunately, some of these families have now found themselves in hot water with HM Revenue & Customs (HMRC).

According to figures obtained by The Telegraph, the Inland Revenue has issued back taxes worth £608million to families it says have not paid enough inheritance tax over the past five years.

In total, reports suggest that nearly 2,000 families have been affected by these tax claims, having breached the various gift rules that form part of the inheritance tax regime.

In some cases, this appears to be due to rules governing “qualified gifts”.

As a general rule, if you give property to a loved one and do not die within seven years of the gift, it is not considered part of your estate when calculating your estate tax.

However, this is not always the case with property. If, for example, you gave your home to your child but continued to live in it, the gift would break the rules unless you paid market-rate rent while you lived there.

This is because you have continued to benefit from the asset, even though you technically no longer own it.

What is clear is that the tax authorities are closely monitoring the amount of tax paid by families falling into the inheritance tax bracket and will actively pursue those they believe were too eager to take advantage. various loopholes open to those seeking to reduce their liability.

Tax revenue up

It should be noted that this repression stems from the increase in tax revenue from inheritance tax.

The latest data from HM Revenue & Customs (HMRC) shows that inheritance tax receipts from April 2021 to March 2022 totaled £6.1billion. That’s a whopping £0.7 billion more than the same period the year before.

That’s a very significant amount of money, driven by a few things, in particular the incredible house price increases we’ve seen over the past few years.

For example, according to the latest Land Registry figures, the average house price in February was £276,755, having jumped 10.9% in the previous 12 months.

This is on top of the huge growth seen in the first year of the pandemic, triggered by the stamp duty holiday.

As the value of our homes increases, this means that more and more estates end up falling within the estate tax thresholds and therefore having to cough up money after death.

I want my money back

Interestingly, at the other end of the scale, thousands of households are successfully claiming back some of the inheritance tax they have already paid.

A freedom of information request from NFU Mutual revealed that 32,000 claims for inheritance tax refunds have been successful over the past six years.

While 2021/22 saw the lowest number of refunds of any fiscal year during this period, there were still more than 4,200 families who managed to recover money from the taxman than they would have didn’t have to pay.

NFU Mutual noted that inheritance tax is assessed based on the value of assets such as property or shares, but the actual figure received from the sale of these assets can be quite different.

Unfortunately, the tax refund is not automatic and must instead be reclaimed proactively, with refunds available on property sold within four years of death or on other eligible investments sold within 12 months of death. death.

In preparation

It is undeniable that inheritance tax is an extremely complex form of taxation. However, if you do your homework on allowances around the tax, you can reduce the amount of your eventual bill.

We’ve put together a comprehensive guide that describes everything you need to know about inheritance tax donations.



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Inheritance tax warning: Thousands recover overpaid IHT as on their estates | Personal finance | Finance https://cleversplitter.com/inheritance-tax-warning-thousands-recover-overpaid-iht-as-on-their-estates-personal-finance-finance/ Mon, 09 May 2022 14:24:00 +0000 https://cleversplitter.com/inheritance-tax-warning-thousands-recover-overpaid-iht-as-on-their-estates-personal-finance-finance/ Tens of thousands of people have been able to claim a cash refund for overpaid tax, according to research by financial advisers NFU Mutual. Inheritance tax is levied on the value of a person’s estate at the date of death, which generally includes property, money and possessions. Under HM Revenue and Customs (HMRC) rules, the […]]]>

Tens of thousands of people have been able to claim a cash refund for overpaid tax, according to research by financial advisers NFU Mutual. Inheritance tax is levied on the value of a person’s estate at the date of death, which generally includes property, money and possessions. Under HM Revenue and Customs (HMRC) rules, the IHT must normally be paid within six months.

On the occasion an executor happens to sell property or shares, and the price has fallen, it is possible to reclaim the overpaid tax from HMRC.

However, this particular inheritance tax refund is not automatic and must be proactively reclaimed by the claimant.

This is only available if executors sell assets within four years of death, or if they sell stocks or other qualifying investments within 12 months of death.

Overall, the UK public have made over 22,000 inheritance tax claims for property and just under 10,000 claims for shares and investments.

READ MORE: 88-year-old in tears after losing £36,000 in savings – after ‘licking’ for 50 years

Sean McCann, Certified Financial Planner at NFU Mutual, explained what these numbers mean when it comes to the public’s relationship to inheritance tax.

On how people can recover money in the IHT, Mr McCann explained: ‘A large inheritance tax bill can be an unpleasant shock to grieving families.

“These figures show that more and more people are becoming aware of the possibility of recovering overpaid inheritance tax.

“Given the dynamism of the housing market, it is surprising to see more than 22,000 claims have been made on the sale of a property or land.

DO NOT MISS

“In some cases, this will have resulted from an overvaluation of the property in the inheritance tax declaration or from deterioration of the property between the death and the subsequent sale.

“There have also been nearly 10,000 claims made following a fall in stocks or investment values.

‘During periods of market volatility his significant families check whether they have overpaid inheritance tax, in certain circumstances claims can amount to thousands of pounds.’

In addition to this, NFU Mutual has shared how people can maximize the amount they can claim in IHT.

Over the next five years, inheritance tax is expected to raise a further £37bn, which is an increase of £10bn from the £27bn accumulated over the past five years.

Families can maximize the amount of inheritance tax they recoup during periods of market volatility, according to McCann.

He added: “As more and more families are drawn into the net of inheritance tax, it is important that they realize that they can reclaim overpaid inheritance tax.

“If you recover the overpaid IHT as a result of a decline in stocks or investments, all eligible investments sold by the executor within 12 months of death must be included in the claim, not just those that lost value.

“If some have appreciated in value, this will reduce the amount of recoverable inheritance tax.

“In these circumstances, it may be more advantageous for the executors to pass on the shares or investments that have increased in value directly to the beneficiaries rather than selling them.

“This means you only claim stocks that have fallen in value, allowing you to maximize the benefits.”

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Expert gives inheritance tax warning to ‘Mom and Dad’s Bank’ amid cost of living crisis https://cleversplitter.com/expert-gives-inheritance-tax-warning-to-mom-and-dads-bank-amid-cost-of-living-crisis/ Mon, 09 May 2022 03:30:00 +0000 https://cleversplitter.com/expert-gives-inheritance-tax-warning-to-mom-and-dads-bank-amid-cost-of-living-crisis/ Rising bills will lead Scots to turn to ‘Mummy and Daddy’s Bank’ as the cost of living crisis deepens, an expert has warned. Lawyer Grant Jonson said that as inflation rises, more parents will feel pressured to give their children money. But he warned that those who gave lump sums of cash to their offspring […]]]>

Rising bills will lead Scots to turn to ‘Mummy and Daddy’s Bank’ as the cost of living crisis deepens, an expert has warned.

Lawyer Grant Jonson said that as inflation rises, more parents will feel pressured to give their children money.

But he warned that those who gave lump sums of cash to their offspring could “come at a cost” in terms of inheritance tax.

While the so-called Mum and Dad Bank has been more traditionally linked to parents helping their adult offspring up the property ladder, Mr Johnson said the rapidly rising cost of living, combined with a parent’s natural instinct to help, might see more people turn to it.

In such situations, he said one should always seek expert advice, to avoid “potential inheritance tax implications”.

HM Revenue and Customs (HMRC) rules state that cash or items worth up to £3,000 can be exempt from tax each year – although different limits apply if cash is given to a child for wedding expenses.

Gifts worth more than this amount could be subject to inheritance tax if the person making them dies within seven years.

Mr Johnson, of Lindsays law firm, said: ‘A parent’s natural instinct is to help wherever they can. Sometimes that means they want – or need – to help. money to his children.

“It’s possible this will become even more common as the bills for all of us increase.”

He added: ‘Looking only at the property market, it may even be that more first-time buyers are dependent on their families for support, as they can save even less due to the rising cost of daily living.’

But the lawyer said: “Unfortunately some gifts have a cost that too many people don’t realize, perhaps most often when trying to help someone buy their own home.

“If or when you open Mum and Dad’s Bank, you should be aware of the potential inheritance tax implications.

“It is a commonly misconceived view that it is simply help with buying a house which carries tax risks. HMRC say a gift can be anything that has This can include help with the cost of repairs or major home projects, a gift of a car or a family heirloom.

He continued: “With the growing number of people relying on loved ones to help them climb the property ladder, there are more who can fall into this trap – even before the financial pressures mount. But it’s still possible to help be donated, as long as people seek expert advice before donating.”

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Inheritance Tax: Seven Ways to Save Thousands on HMRC Inheritance Tax Bill | Personal finance | Finance https://cleversplitter.com/inheritance-tax-seven-ways-to-save-thousands-on-hmrc-inheritance-tax-bill-personal-finance-finance/ Sun, 08 May 2022 07:00:00 +0000 https://cleversplitter.com/inheritance-tax-seven-ways-to-save-thousands-on-hmrc-inheritance-tax-bill-personal-finance-finance/ Although it is well documented how to reduce the amount of inheritance tax Britons have to pay before a loved one dies, people often overlook what can be done after they die. Huge savings can be made if taxpayers follow the right advice. Britons can apply for a 5% discount if the property has tenants […]]]>

Although it is well documented how to reduce the amount of inheritance tax Britons have to pay before a loved one dies, people often overlook what can be done after they die. Huge savings can be made if taxpayers follow the right advice.

Britons can apply for a 5% discount if the property has tenants on site.

If the property is occupied by short-term tenants for a year or less, HMRC will usually accept a five per cent discount on the total value of the property.

If the tenant has signed a commercial lease or has a longer fixed-term lease, the deductions can be higher than 5%.

However, many people do not take advantage of this easy-to-earn tax savings.

Other factors that can affect the amount IHT family members pay include whether the property was jointly owned at the time of death.

Mr Green continued: “Section 18 of the IHT Handbook allows an additional deduction of 15% of the deceased’s share of the property, if at the valuation date a co-owner was still occupying the property as their principal residence.

“If the co-owner(s) did not occupy the property as their principal residence, the discount can still be up to 10%.”

If the property is jointly owned by a company, a discount on the deceased’s share of up to 20% may be applied depending on whether the deceased owned minority or majority shares.

Seven questions people need to ask themselves are:

1) When was the property appraised?
The value of the property on the date of death may be much lower than the current market value or any estate agent assessment.

2) Is the property rented?
Many areas are missing out on this easy-to-win concession.

3) Are there any major defects in the property or missing security certificates?
If at that date of death the property suffered from defects such as subsidence or high humidity, even if these defects have now been repaired, these elements must be taken into account when assessing the value.

4) Was the property jointly owned on the date of death?
The discount can be up to 10%.

5) Is the property owned by a company?
Again, a reduction on the deceased’s share must be applied, up to a maximum of 20%.

6) Are there any neighborhood issues affecting the property?
A neighbor’s planning request may have a negative effect on the value of the
property.

7) Is the property in a block of flats?
This could lead to additional expenses if work is in progress.

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