Families handed over £608million inheritance tax bills during crackdown
Sean McCann, of consultancy NFU Mutual, said today’s tough markets would lead to further increases in overpayments and the “notoriously complex system” would cause “chaos” for families. Claims for refund of overpaid tax relating to investments can be made within 12 months of the payment of the tax; if the claim relates to goods, the period is four years.
“All eligible investments sold by the executor within 12 months of death must be included in the claim, not just those that have declined in value. If some have increased in value, that will reduce the amount of IHT that can be recovered,” McCann said.
“It may be more beneficial to pass on the stocks or investments that have appreciated directly to the beneficiaries rather than selling them. This means that you only claim shares that have fallen in value.
Other ways to reduce IHT bills are to make regular donations from excess income, which are 100% exempt and uncapped, as long as you can prove they haven’t lowered your standard of living. Other donations of any size can be tax-free if they survive for seven years, while smaller donations of up to £3,000 can be made annually without incurring tax.
While families can give their home to their children to minimize inheritance tax, they cannot continue to live in the home without triggering benefit booking rules – unless they pay market rate rent .
For retirees living in larger family homes, this is likely to be costly and will also lead to higher income tax bills for their family, as well as capital gains tax bills if their children sell. later. Other options include paying a guaranteed insurance policy to be paid into a trust on death or providing a pot to cover tax bills on death, as well as investing in riskier assets. such as Aim shares, many of which are 100% exempt from IHT.