tax bill – Clever Splitter http://cleversplitter.com/ Fri, 04 Mar 2022 01:37:58 +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 tax bill – Clever Splitter http://cleversplitter.com/ 32 32 Inheritance Tax: How to Help Your Kids Buy a Home and Lower Your Bill | Personal finance | Finance https://cleversplitter.com/inheritance-tax-how-to-help-your-kids-buy-a-home-and-lower-your-bill-personal-finance-finance/ Thu, 03 Mar 2022 12:56:00 +0000 https://cleversplitter.com/inheritance-tax-how-to-help-your-kids-buy-a-home-and-lower-your-bill-personal-finance-finance/ Parents and grandparents can help adult children buy a home without handing over all their earnings to HM Revenue and Customs (HMRC). Plus, it could also lower their inheritance tax bill and leave them with more money to spend. When it comes to climbing the property ladder, more than a third of Britons (33%) rely […]]]>

Parents and grandparents can help adult children buy a home without handing over all their earnings to HM Revenue and Customs (HMRC). Plus, it could also lower their inheritance tax bill and leave them with more money to spend.

When it comes to climbing the property ladder, more than a third of Britons (33%) rely on the Bank of Mum and Dad or the Bank of Grandma and Granddad.

According to a recent legal and general survey, older Britons give an average of £19,000 to younger family members to help them get on the housing ladder.

However, anything over £3,000 could be subject to a hefty Inheritance Tax (IHT) bill of 40%.

That said, there are ways to increase this allowance and avoid paying the IHT altogether.

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Ms Corr said: ‘Trusts allow you to give money, property or investments to someone else to look after for the benefit of a third party.

“When you create a trust, there will be a trustee (who owns and manages the assets of the trust) and one or more beneficiaries (the person or persons for whom the trust is created).

“Often they are unable to manage it on their own due to their age, disability, etc.

“Once assets are placed in a trust, they no longer belong to you, and that is how they are tax-efficient.”

Due to the complex nature of inheritance tax and trusts, it may be wise to seek advice from an independent financial adviser before embarking on this course.

There is certainly benefit in reviewing the rules, thresholds and allocations as collectively the nation gave away £125million in ‘unnecessary’ IHT in 2020.

Britons can choose to make gifts seven years before their death, which would be classified as potentially exempt transfers.

They may also want to make the most of cash grants – people can offer up to £3,000 per tax year plus small gifts of £250 or less.

As wedding season approaches, it is also worth bearing in mind that taxpayers may provide wedding and civil partnership gifts.

This could allow them to donate an additional £5,000 without being subject to IHT.

They can also carry over an allowance from a previous year if it has not already been used.

For example, a parent could gift their child up to £11,000 tax-free in one year – a gift of £5,000 made in consideration of the marriage plus that year’s £3,000 annual exemption and that last year if it has not already been used.

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Advertiser.ie – Inheritance tax – Married couples https://cleversplitter.com/advertiser-ie-inheritance-tax-married-couples/ Thu, 17 Feb 2022 00:43:32 +0000 https://cleversplitter.com/advertiser-ie-inheritance-tax-married-couples/ My husband and I have been living together for two years. I own the house where we live. My spouse recently told me that he made a will and bequeaths his entire estate to me. He’s not particularly wealthy, but I understand he has a large life insurance policy. I don’t want to sound ungrateful, […]]]>

My husband and I have been living together for two years. I own the house where we live. My spouse recently told me that he made a will and bequeaths his entire estate to me. He’s not particularly wealthy, but I understand he has a large life insurance policy. I don’t want to sound ungrateful, but if my partner died, would I end up with a really big inheritance tax bill?

A person has the right to receive a gift or inheritance up to a certain value without being liable for inheritance tax, also known as capital acquisition tax. The amount of tax payable depends on the amount of the gift or inheritance and the relationship between the parties. For tax purposes, relationships are classified into three different groups, namely Groups A, B and C.

Group A applies when the beneficiary, that is to say the person who receives the gift or the inheritance, is a child of the person who gives this gift or this inheritance (disponer). This includes a stepson and an adopted child. It may also include a parent, an adopted child and a favorite niece or nephew in certain limited circumstances.

Group B applies when the beneficiary is a grandparent, grandchild, great-grandchild, brother, sister, aunt, uncle, nephew or niece of the settlor. A parent who does not qualify in Group A will fall into Group B.

Group C applies to any relationship not included in Group A or Group B.

The amount that can be received tax-free is known as the threshold. The current threshold for Group A is €335,000, Group B is €32,500 and Group C is €16,250. A gift or inheritance up to the threshold amount does not attract capital acquisition tax. A gift or inheritance above the threshold will be subject to 33% tax on that amount above the threshold.

If you receive a gift or inheritance from your spouse or civil partner, you are exempt from capital acquisition tax. Unfortunately, the same exemption does not apply to partners living together. Therefore, if you live with someone and you are not married or in a PACS, you will only be able to inherit up to €16,250 from your partner tax-free. The rest will be taxed at 33%.

This column is prepared by Dolores Gacquin, notary. Byrne Carolan Cunningham has offices in Galway, Athlone, Moate and Lanesboro. A person should always contact their lawyer for legal advice specific to their own situation. This column above contains general advice and should not be considered legal advice. In litigious cases, an attorney may not calculate fees or other charges as a percentage or proportion of any award or settlement.

Call Byrne Carolan Cunningham on (090) 6478433.

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Inheritance tax: how to help the children of a house without handing everything over to HMRC | Personal finance | Finance https://cleversplitter.com/inheritance-tax-how-to-help-the-children-of-a-house-without-handing-everything-over-to-hmrc-personal-finance-finance/ Thu, 10 Feb 2022 09:26:00 +0000 https://cleversplitter.com/inheritance-tax-how-to-help-the-children-of-a-house-without-handing-everything-over-to-hmrc-personal-finance-finance/ When it comes to moving up the property ladder, more than a third of people (33%) rely on Mom and Dad’s Bank – or even Grandma and Grandpa’s Bank. So how can grandparents and parents avoid handing over all their money to HMRC? HMRC is set to collect £6.9billion in inheritance tax in 2023 to […]]]>

When it comes to moving up the property ladder, more than a third of people (33%) rely on Mom and Dad’s Bank – or even Grandma and Grandpa’s Bank. So how can grandparents and parents avoid handing over all their money to HMRC?

HMRC is set to collect £6.9billion in inheritance tax in 2023 to 2024, a significant portion of which is due to donations gone wrong.

Every year Britons are allowed to give away £3,000 without incurring a hefty inheritance tax bill.

According to a legal and general survey, the average payment to young family members to help them move up the property ladder is £19,000.

This would mean Britons face a hefty inheritance tax (IHT) bill of 40% on the amount over £3,000, if they had already exceeded the inheritance tax threshold which is normally £325,000 £.

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Another way for generous grandparents and parents to avoid giving all their money to the taxman is to take advantage of the wedding gift allowance.

Emi Page, partner at law firm Winckworth Sherwood, explained: “A parent can offer their child up to £8,000 – a gift of £5,000 made in consideration of the marriage plus the use of their annual exemption from £3,000.

“Or possibly up to £11,000 if they can carry over an unused full annual exemption from the previous tax year.”

However, experts advise the older generation not to forget their own needs and make sure there are enough left over to enjoy their retirement.

Another way some may seek to pay less inheritance tax is to put the family home in the name of a child, but there are some complications with this method.

Tim Latham, Certified Financial Planner at Equilibrium Financial Planning, told Express.co.uk: “The problem with putting your house in your children’s name is the rules around gifts with reservation.

“These rules mean that if you continue to benefit from the property after the gift, for example still living in a house, the gift would not qualify and inheritance tax would still be due on the value of the property.

“For the house to be considered a gift for estate tax purposes, you must pay your children market rent after you gift your house to them.”

For anyone considering going down this road, Mr Latham advises Britons to beware and seek professional advice.

He added: ‘Your children may have to pay income tax on the rent you pay them, and there may also be capital gains tax payable between the date of the gift and the date of death. .

“Depending on the financial situation of your children, there is also a risk that you will lose your home in the event of divorce or bankruptcy.

“It’s important to think about what you want your money to achieve, who and how you want to help.”

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Legacy Release Helps Clients Navigate Troubled Estate Tax Waters https://cleversplitter.com/legacy-release-helps-clients-navigate-troubled-estate-tax-waters/ Thu, 16 Dec 2021 16:00:30 +0000 https://cleversplitter.com/legacy-release-helps-clients-navigate-troubled-estate-tax-waters/ [ad_1] A big tax bill at the start is the last thing you want when dealing with a complex inheritance. Legacy version can help customers navigate those rough waters ‘One of the reasons The old version exists is to help our clients cope with the problem of having to pay inheritance tax before actually receiving […]]]>


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A big tax bill at the start is the last thing you want when dealing with a complex inheritance. Legacy version can help customers navigate those rough waters

‘One of the reasons The old version exists is to help our clients cope with the problem of having to pay inheritance tax before actually receiving their inheritance, ”explains Simon Dawson, Commercial Director of the company.

This is a situation, he explains, which sometimes happens to HNW customers due to an issue in UK probate rules that require inheritance tax to be paid before a probate clearance can be issued. granted. This can pose particular problems for asset-rich and cash-poor beneficiaries, who may end up with a bill that exceeds their cash flow at the time.

The more complex the field, says Dawson, the greater the risk of other problems. “Recipients are likely to have different priorities, and while some may be happy to wait, others may need to access their inheritance earlier, perhaps to pay for school fees or a wedding. “he said. “In other cases, it may be necessary to hire a forensic accountant to trace the assets, or a lawyer who is unable to work off-line. These may not be testamentary costs, which means they cannot be taken out of the estate.

Under such circumstances, he tells Spear’s, Legacy Release can provide HNW clients with a quick and timely loan up to 70 percent of the estate. As the loan is secured by the value of the estate itself, rather than the credit status of the beneficiary, the money can be arranged reliably and quickly without complications.

Dawson would like to point out that the company’s loans are completely unconditional. “The advance can be used for almost any purpose,” he adds. “What matters to us is that the customer has the money when they need it most. In return, borrowers pay a lump sum of 2% of the amount borrowed, with a monthly fee of 1.35% taken from the balance. Payment is taken from the estate after probate has been paid.

With a background in litigation loan, Dawson draws parallels between the world of divorce loans – now an established part of HNW family law – and the emerging field of estate loans. “We are one of the few companies in the market here,” he adds. “We understand the complexity of the problem and the simplicity of the solution. “

While large retail banks previously offered specialized estate release loans, these offers have been curtailed in recent years. Part of the reason, says Dawson, is the heightened level of risk for lenders, especially when it comes to assessing large and complex areas. “As a lender, it’s entirely up to us to assess the value of the estate,” he says. “We do not require any personal guarantees or security because we bear the burden of risk. Since the loans are based on real assets, the risk of default is minimal.

As one of the emerging leaders in the field, Legacy Release recently received the support of a major financial partner backed by significant private equity. Dawson hopes this will help the company expand its presence and the estate loan market itself.

With a specialist firm providing execution services only to HNW clients, the proposal currently falls outside the regulatory orbit of the UK’s Financial Conduct Authority. One of the benefits of this, Dawson says, is the added agility it brings, as the company is able to lend quickly without any delay.

“As we develop our offering, we will almost certainly seek FCA approval,” he says. “At the moment, however, our focus is on the HNW community. And we know our customers value our ability to act as quickly as possible. ‘

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Inheritance tax warning: ‘middle-income’ Britons set to pay a heavy bill – act now | Personal Finances | Finance https://cleversplitter.com/inheritance-tax-warning-middle-income-britons-set-to-pay-a-heavy-bill-act-now-personal-finances-finance/ Sun, 12 Dec 2021 04:01:00 +0000 https://cleversplitter.com/inheritance-tax-warning-middle-income-britons-set-to-pay-a-heavy-bill-act-now-personal-finances-finance/ [ad_1] Middle-income families are heading for the 40 percent inheritance tax bracket due to rising house prices and the five-year freeze on IHT brackets. The combination of these two elements means that unsuspecting individuals will find themselves pushed above the tax exemption threshold. In fact, the Office for Budget Responsibility has predicted that the number […]]]>


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Middle-income families are heading for the 40 percent inheritance tax bracket due to rising house prices and the five-year freeze on IHT brackets. The combination of these two elements means that unsuspecting individuals will find themselves pushed above the tax exemption threshold. In fact, the Office for Budget Responsibility has predicted that the number of additional people reaching the threshold will rise to more than 41,000 per year by 2026.

As a result, many people hope to find ways to legally reduce their liability.

Samantha Warner, Product Manager at Arken.legal, spoke exclusively to Express.co.uk and shared some tips to help Brits alleviate an inheritance tax bill.

First, Ms. Warner recommended transferring the assets that a person holds into a trust.

This is because they will not be part of the person’s estate, thus reducing the IHT liability.

READ MORE: State retirees urged to verify eligibility for ‘benefit’ worth £ 3,000

A next action is to dismantle the zero rate residency tranche (RNRB), an essential reduction for inheritance taxes which concern property.

Ms Warner explained, “If you separate the RNRB, you can protect it for the direct line descendants and the rest of the estate can be put in trust.

“It can help with tax planning in families – if a person puts their estate in a trust rather than leaving it directly, the family can benefit from the trust while they are alive, but the assets will not be part of their estate at the time. death and can help keep the death estates of family members below the applicable tax thresholds.

“Splitting the RNRB makes it possible to offer it directly, thus taking advantage of the full value of this allocation to the extent possible. “

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A third way for someone to reduce their inheritance tax is through the Lifetime Gifting process.

Lifetime gifts can help Britons reduce the size of their estates on death, especially if a system is in place, Ms Warner said.

Gifts are generally exempt from the IHT as long as a person survives the gift for seven years.

However, if the donor does not survive the seven-year period, then the donation becomes a potentially exempt transfer failure. This means that the IHT is billed, albeit at a declining rate on a decreasing scale.

Setting up a program to donate part of the value of an estate is considered a good way to insure against IHT liability.

Ms Warner also recommended that Britons study the idea of ​​leaving part of their estate to charity when they die.

The inheritance tax bill will not include anything that a person decides to leave to charity.

It could be a win-win, allowing Britons to support a cause close to their hearts, while lowering their estate bills.

Ms Warner pointed out that leaving at least 10 percent of an estate to charity comes with bonuses as well.

This is because the rule states that if this is done, the IHT rate on the remaining assets is reduced from 40 percent to 36 percent.

Finally, the fifth tip for alleviating an inheritance tax bill is about using flexible life interest trusts.

Ms. Warner said, “Flexible life interest trusts allow a beneficiary to receive income from the trust for life.

“These trusts can be structured so that capital can also be offered, reducing the size of the asset over the lifetime.”

Generally speaking, if a person is worried about inheritance tax or wishes to make decisions to reduce their bill, they are invited to consult experts.

This is especially the case with more complex ideas around tax planning, such as the use of trusts.

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Inheritance tax warning as Britons face billions of dollars to live in their own homes | Personal Finances | Finance https://cleversplitter.com/inheritance-tax-warning-as-britons-face-billions-of-dollars-to-live-in-their-own-homes-personal-finances-finance/ Sat, 04 Dec 2021 04:01:00 +0000 https://cleversplitter.com/inheritance-tax-warning-as-britons-face-billions-of-dollars-to-live-in-their-own-homes-personal-finances-finance/ [ad_1] The inheritance tax is currently set at 40 percent, but with many people who hate this tax, they will want to legally avoid it. One of the main ways to avoid the direct debit is to leave everything to one partner, however, the partner must be a spouse or civil partner. Because of this, […]]]>


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The inheritance tax is currently set at 40 percent, but with many people who hate this tax, they will want to legally avoid it. One of the main ways to avoid the direct debit is to leave everything to one partner, however, the partner must be a spouse or civil partner. Because of this, those who are unmarried and cohabiting could face a potentially colossal tax bill, a leading expert warned.

“Let’s say you own a £ 1million property together and the surviving partner inherits. You get £ 325,000 tax-free, but the remaining £ 175,000 is taxable.

“So you have to come up with 40 percent of £ 175,000 – that’s £ 40,000 or £ 50,000 just to continue living in your own house as usual.”

The fact that a couple has lived together for years, if not decades, unfortunately does not matter under the current rules.

For this reason, people should be especially careful and take action if they wish, to avoid a bad shock.

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Ms Roche continued: ‘Unless you are married or in a civil partnership, you will potentially have to find thousands of pounds to pay that tax bill.

“This shows that no matter if it is your own possession or property, the tax will always apply.”

Ms. Roche explained that this is a consideration that many people overlook in their day-to-day lives.

But it could cause chaos later, and potentially a lot of financial grief.

Attitudes towards marriage and civil partnership are clearly changing, with ONS research showing a change.

Statistics have shown that the proportion of families comprising a cohabiting couple increased from 15.3% to 18.4% in the 10 years until 2019.

However, as times have moved in this direction, from a monetary standpoint, the system seems to stay the same.

Ms. Roche underlined: “The law has been changed with regard to marriage when one thinks of civil partnership.

“It is no longer only same-sex couples who can be civil partners, but also heterosexual couples.

“A lot of people don’t want to ‘get married’ as such, so this might be a solution if they hope to legally avoid tax.

“But whatever, it’s still a bit tricky for a lot of people.

“Some couples absolutely do not want to get married or have automatic inheritance tax, which is why they remain as a couple.

“But if you make this choice, you should be aware of the tax implications you might have on yourself.”

For some, however, the issue of marriage and inheritance is not a conscious decision, and therefore Ms Roche said some couples may wish to consider the matter.

She stressed the importance of exploring this issue further and possibly consulting experts to provide assistance.

Ms. Roche concluded: “Again, this is a knowledge of inheritance tax rules.

“It really is a minefield, and it’s definitely worth getting some advice because you can save a lot of money, time, and arguments by sorting it out in the first place.

“It might sound expensive, but it could be worth it – there’s a reason for that, because they’re going to cover everything. “

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How does the “7-year rule” of inheritance tax work to exempt donations https://cleversplitter.com/how-does-the-7-year-rule-of-inheritance-tax-work-to-exempt-donations/ Thu, 02 Dec 2021 08:00:00 +0000 https://cleversplitter.com/how-does-the-7-year-rule-of-inheritance-tax-work-to-exempt-donations/ A third of Britons over 55 do not have specific plans for how they will pass their wealth on to friends or family after they pass away, although they do want to. Research by Fidelity International also found that half of Britons were unaware or had never heard of the ‘seven-year rule’ of inheritance tax […]]]>

A third of Britons over 55 do not have specific plans for how they will pass their wealth on to friends or family after they pass away, although they do want to.

Research by Fidelity International also found that half of Britons were unaware or had never heard of the ‘seven-year rule’ of inheritance tax – although it could potentially exempt their citizens. beneficiaries of the levy.

The rule allows a donation of money, property or other assets to be exempt from inheritance tax (IHT) if the person offering it lives after seven years.

One-fifth of those intending to leave an inheritance worry about not understanding how much inheritance tax they might have to pay, or how to manage it effectively

This is a fundamental concept for anyone considering passing an estate on to the next generation, especially if their estate exceeds the current IHT threshold.

According to Fidelity, two-thirds of people aged 55 and over intend to leave a legacy with friends and family.

However, nearly a fifth of those intending to leave a legacy said they did not understand how much tax they might have to pay, and how to manage it effectively.

This is Money explains how inheritance tax works and what people need to know when considering how best to pass on their assets.

What are inheritance taxes levied on?

Inheritance tax is a tax on the estate of a deceased person, including their property, possessions and money.

It is typically charged at 40 percent on anything over the zero rate allocation bracket.

The standard zero rate range is £ 325,000 per person. However, there are several ways to increase your allowance.

First, any unused part of a deceased’s IHT allowance can be passed on to a spouse or civil partner, which can bring their limit up to £ 650,000.

Second, if a married couple or a PACS couple cedes their primary residence to their direct descendants, their limit is raised to a total of £ 500,000 each, or £ 1 million combined. This is called “the reduction of the principal residence”.

Confusion: According to Fidelity, nearly a fifth of people intending to leave an inheritance worried they might not understand how much tax they might have to pay

Confusion: According to Fidelity, nearly a fifth of people intending to leave an inheritance worried they might not understand how much tax they might have to pay

However, if the total value of an estate is worth £ 2million or more, the additional principal residence relief will be reduced to £ 1 for every £ 2 above the £ 2million threshold. .

This means that some higher value areas end up losing the edge altogether.

What is the typical heritage?

The average inheritance received in the UK is currently worth £ 70,639.

Even if someone left this amount for all of their four children, it would still be well below the limit of £ 325,000 for IHT.

But while tax is only paid by a small number of estates at present, the amount collected by the tax authorities has almost doubled in a decade, from £ 2.9 billion in 2011/12 to £ 5.33 billion in 2020/21.

In recent decades, more families have been caught in the inheritance tax net as rising house prices push more homes over the limit.

And with Chancellor Rishi Sunak freezing inheritance tax thresholds at current rates until 2026, that means more and more people will be dragged into paying tax.

Some analysts suggest that in the future, up to one in ten estates could end up paying 40% tax on some of the wealth they have passed on.

What does the seven-year rule apply to?

In most cases, the seven-year rule applies to all gifts that are greater than an individual’s annual grant allowance.

Usually this is £ 3,000 although if not used it can be renewed once giving them a limit of £ 6,000.

SUCCESS TAXES AND TAPERED LIGHTENING
Years between gift and death Tax paid
Less than 3 40%
3 to 4 32%
4 to 5 24%
5 to 6 16%
6 to 7 8%
7 or more 0%

For the purposes of the IHT, donations in excess of these allowances are referred to as potentially exempt transfers.

If they do not exceed the person’s allowance of £ 325,000 at the time of death, nothing needs to be done.

But if the person exceeded this allowance at the time of death, the donation will only be exempt from inheritance tax if the person who made the donation survived more than seven years after making it.

If a person dies between three and seven years after making a donation, the inheritance tax due is gradually reduced.

For example, the tax burden drops from 40 to 32 percent if a person lives three years after making a donation, and from 32 to 24 percent if they survive four years.

Dawn Mealing, Head of Advisory Policy and Development at Fidelity International, said: “Our research points to a real problem with estate planning in that many people don’t know where to start.

Fidelity research also found that only 12% of people aged 55 and over had discussed estate planning with a financial advisor, and only three-fifths had made a will.

Fidelity research also found that only 12% of people aged 55 and over had discussed estate planning with a financial advisor, and only three-fifths had made a will.

“Consumers have said they think the rules and regulations are confusing, and it is concerning that a third of those nearing retirement have no concrete plan to pass their wealth on.

“Ultimately, that could mean they have a lot less to leave with their loved ones than they would like.”

Do all inheritances have to be declared to the tax authorities?

Fidelity’s research also suggested that many Britons might worry unnecessarily about the need to report inheritances they receive to HMRC.

So far, around 275,000 of the average 570,000 deaths per year have resulted in the submission of inheritance tax forms with the estate value declared to HMRC, even with no taxes payable.

This despite the fact that less than 25,000 bereaved families per year are subject to inheritance tax, which represents 5% of all deaths, according to the Office of Tax Simplification.

But new rules are coming from January 2022, which means that nine out of ten estates that are not subject to inheritance tax will no longer need to fill out the forms.

Fidelity found that up to 85% of people aged 55 or older were unaware of the new rules.

TAXATION ON HMRC’S LEGACIES
Taxation year Government estate tax receipts (billions of pounds sterling)
2011/12 £ 2.90 billion
2012/13 £ 3.11 billion
2013/14 £ 3.40 billion
2014/15 £ 3.80 billion
2015/16 £ 4.65 billion
2016/17 £ 4.82 billion
2017/18 £ 5.21 billion
2018/19 £ 5.36 billion
2019/20 £ 5.12 billion
2020/21 £ 5.33 billion
Source: mutual HMRC / NFU

How can you pay less?

If you’re worried about inheritance taxes, you might want to give gifts to your family while you’re alive rather than leaving everything in your will.

Not only does this offer tax benefits, but it also means you can see them enjoying their freebies while you’re still around.

You receive a gift allowance of £ 3,000 each year which falls immediately from your estate for inheritance tax purposes.

You can also make small gifts up to £ 250, specific gifts for family weddings and unlimited regular gifts from your income.

As for those who need to reduce or avoid a large inheritance tax bill, we have previously compiled an overview of ways to do so, some of which can be easily undertaken by any ordinary person without the need for convoluted arrangements or paying for professional help.

Some links in this article may be affiliate links. If you click on it, we may earn a small commission. This helps us fund This Is Money and keep it free to use. We do not write articles to promote products. We do not allow any commercial relationship to affect our editorial independence.

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Everything you need to know about Christmas gifts and inheritance tax https://cleversplitter.com/everything-you-need-to-know-about-christmas-gifts-and-inheritance-tax/ Mon, 29 Nov 2021 17:54:00 +0000 https://cleversplitter.com/everything-you-need-to-know-about-christmas-gifts-and-inheritance-tax/ [ad_1] Make sure your generosity at Christmas doesn’t mean a tax bill for your family It is simply a tax on a person’s property at the time of death. It may also be payable by the recipient of the donation depending on the value of the donation and the value of other donations made by […]]]>


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Make sure your generosity at Christmas doesn’t mean a tax bill for your family

It is simply a tax on a person’s property at the time of death. It may also be payable by the recipient of the donation depending on the value of the donation and the value of other donations made by the donor within seven years of the donor’s death. The gift does not have to be monetary; it can also be property or possessions.

Per tax year, a person is able to give a running total of £ 3,000 to whomever they want. They can also give as many small gifts under £ 250 to as many different people as they want.

What is the seven year rule?

The seven year rule becomes relevant when a person gives more than £ 3,000 in a fiscal year. It stipulates that the donor must survive for seven years after the donation in order for him to be exempt from inheritance tax. Otherwise, the value of the gift is recorded in their estate when calculating inheritance tax due. Such donations will reduce the abatement (zero rate) available on their death and, if the value of the donations exceeds this, the recipient (s) will be liable for inheritance tax attributable to the donation (s) received. However, the tax payable begins to decrease if more than three years have passed since the date of the donation.

Are there any gifts that are exempt?

Donations to charities and certain gifts for weddings or civil partnerships are not subject to inheritance tax, depending on a person’s degree of kinship with the happy couple. All donations between married couples or between civil partners are also exempt.

Is there a way to avoid inheritance tax for sure?

Unfortunately, unless someone is a psychic, there is no surefire way to avoid inheritance tax on gifts over £ 3,000.

However, there is the possibility of using “excess income”. If a person can prove that their income covers all living expenses and that their standard of living can be maintained after the donation, then it may be possible to apply for an inheritance tax exemption. However, to be eligible, there must be a regular pattern for this donation.

Need help with your estate planning? For a free consultation, call 07976 412 698, send an email [email protected] or visit our website here

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Inheritance Tax Advice – Business Live https://cleversplitter.com/inheritance-tax-advice-business-live/ Wed, 24 Nov 2021 12:45:20 +0000 https://cleversplitter.com/inheritance-tax-advice-business-live/ [ad_1] Following my two recent columns on inheritance tax, I have a few other helpful tips from your questions that you might find helpful. I used to park for free on the street, at the hospital; there was no tax on my insurance premiums; the NHS provided me with care when I needed it. I […]]]>


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Following my two recent columns on inheritance tax, I have a few other helpful tips from your questions that you might find helpful.

I used to park for free on the street, at the hospital; there was no tax on my insurance premiums; the NHS provided me with care when I needed it. I could go on.

Meanwhile, I can send a split second ‘letter’ (email) and cut huge paper costs and time, create a business transaction in an hour that would have taken days with faxes, letters. and stamps. I can attend meetings all over the world instantly with my shorts and flip flops on, as long as I have a nice shirt. My little phone is over 500 times the size of my first computer, and my broadband connects over 1,000 times faster than my first computer.

If everything is so much easier, then why are my costs constantly increasing and taxes going up?

More Peter McGahan Chronicles

Thus, after having been taxed at the highest point in our lifetime, the ever popular inheritance tax takes its share of 40%. Your pension: People under 75 in the event of death are allowed to transfer all of their pension benefits to a defined contribution plan directly to their beneficiaries without having to pay tax. Then there is a tax applicable at the marginal rate of the beneficiary’s income tax.

It is therefore wise during your lifetime (up to age 75) to use your taxable income and your savings within your taxable heritage to provide you with income and capital and allow this pot to build up.

Life Insurance: I’ve written about this before, but a little advice: if you want to keep all of your investments smooth and always under control, you can insure against it.

Normally, when you purchase insurance for a large tax sum, the premiums can be high, but this is when you set it up with joint first-to-die life insurance. A joint life insurance policy on the second death is less expensive and it is the plan normally needed to protect against the cost of inheritance tax.

You calculate the potential tax, insure yourself and your partner against this amount and establish the payment plan on the second death. The amount is put into a trust that goes directly to the tax-free beneficiaries who then pay the tax bill. I can argue that premiums pay some of the tax up front, but there is tremendous flexibility in knowing that you don’t need to lock in assets now.

Those with a large amount of fixed assets, especially after their recent increase (a house and things that aren’t liquid like cash) can be a bit tied to capital. How to donate your house while keeping an interest in it without falling into the gift trap with reservation rules for example?



Peter McGahan, Managing Director of Worldwide Financial Planning

One of the many options is to create debt inside your estate while moving money outside of your estate. If you use an equity release plan with an independent financial advisor and your lawyer and raise money against the house, the debt inside your estate increases. On death, this debt is subtracted from your taxable wealth, which reduces the tax payable.

During this time, the capital that you have raised is of course still inside the estate, so it is placed in a trust for the benefit of the beneficiaries. There are a lot of options out there, but I’ll use the discounted gift trust I mentioned a few weeks ago to explain a way to get this out of the estate.

The capital raised against the house is placed in a trust which gives you access to withdrawals (your “income”) from the trust for the rest of your life. After seven years, the money offered is out of the domain with the growth of the domain, but it also gets a discount in between.

Income calculates your entitlement to withdrawals (your “income”) and depending on the amount and age, the gift is discounted.

So, after seven years, you have debt inside your estate and the capital and its growth outside the estate. As withdrawals come in every year, they could be redirected to the beneficiaries so that they never go into the estate.

If you have a question about inheritance tax, please call 01872 222422 or email info@wwfp.net or visit us at www.wwfp.net

Peter McGahan is the Managing Director of the independent financial advisor Worldwide Financial Planning . Worldwide Financial Planning is authorized and regulated by the Financial Conduct Authority. The FCA does not regulate credit cards, will drafting, and some forms of mortgage and estate planning.

The information provided is for guidance only and specific advice should be taken before acting on any suggestions made. All information is based on our understanding of current tax practices, which are subject to change. The value of stocks and investments can go down as well as up. Your home can be repossessed if you don’t pay off your mortgage.

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How the Samsung family’s £ 7 billion inheritance tax bill is sounding the alarm even beyond South Korea https://cleversplitter.com/how-the-samsung-familys-7-billion-inheritance-tax-bill-is-sounding-the-alarm-even-beyond-south-korea/ Wed, 17 Nov 2021 14:38:49 +0000 https://cleversplitter.com/how-the-samsung-familys-7-billion-inheritance-tax-bill-is-sounding-the-alarm-even-beyond-south-korea/ [ad_1] The £ 7 billion inheritance tax bill facing the family behind Samsung has raised alarm bells even beyond South Korea, writes Arun Kakar For the Lee Dynasty, 2021 has not started well. Following the death of Samsung Chairman Lee Kun-hee at the end of 2020, and as the de facto chieftain headed for prison, […]]]>


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The £ 7 billion inheritance tax bill facing the family behind Samsung has raised alarm bells even beyond South Korea, writes Arun Kakar

For the Lee Dynasty, 2021 has not started well. Following the death of Samsung Chairman Lee Kun-hee at the end of 2020, and as the de facto chieftain headed for prison, the family was facing a record inheritance tax bill of 12 trillion Korean won – over £ 7 billion.

In April, it was announced that the Lees would donate 23,000 works of art worth around £ 1.3 billion to South Korean museums to help pay off one of the biggest inheritance tax bills in history, which equates to “three to four times the Korean government’s total tax revenue last year, “as the family painfully explained in a report.

Inheritance tax in South Korea the prices are among the strictest in the world. The state levies a tax of 50 percent of the value of assets, which is 60 percent on the company’s stock – well above the 40 percent rate in the US and UK . Not only is the rate higher, but the constraints are also more severe.

Under Korean tax law, certain exemptions and reliefs are available for small and medium-sized businesses, notes Kelly Greig, head of tax at Paris Smith. But clearly, this does not apply to Samsung.

The system is even more punitive. “In addition to the high [inheritance] tax rate, the family can only spread the cost of the tax over five years. Other countries have taken a more generous ten-year payout approach for certain assets, ”said Greig. spear. “It saw the family having to borrow money at high interest rates in order to meet the liability.”

The fact that Kun-hee’s son and vice president of Samsung adds another dimension to the case Lee Jae-yong was in prison at the time of the family’s announcement, serving a two-and-a-half-year sentence for corruption, embezzlement and concealment. In January, Jae-yong, who became de facto head of the conglomerate in 2014 after his father suffered a heart attack, has been recognized by a court as having “Actively provided bribes and implicitly asked the president to use his power to help his smooth succession.” In August, he was released earlier.

The drama has highlighted the ‘chaebols’, South Korean family conglomerates that also include Hyundai and SK Group. Owned, controlled and managed by family dynasties, the chaebols emerged in the mid-20th century during President Park Chung-hee’s rapid industrialization program, which spurred South Korea’s development of a predominantly agrarian economy by one of the world’s leading manufacturers of cars, telecommunications and electronics. .

More than 40 chaebols are active today, collectively representing about half of the South Korean stock market. According to the Council of Foreign Relations, an American think tank, The chaebols maintain a “symbiotic” relationship in government, an aspect of their existence that came to light during Lee Jae-yong’s trial.

The reputation of the chaebols suffers in South Korea, where they are sometimes seen as examples of unfair trade practices and stifling competition. President Moon Jae-in, who was comfortably re-elected last year, first took office in 2017 with a pledge to tame conglomerates, and last December he passed a bill to make more difficult for larger shareholders to appoint auditors and increase control over affiliate relations.

Samsung, South Korea’s largest chaebol (it accounts for 20% of the country’s economy), is also a point of contact for the intersection between reputation and tax issues faced by wealthy families outside of Korea. from South.

“In the case of Samsung, I’m sure the family’s recent reputation concerns were factored into a public display of high-profile philanthropy,” says Marcus Parker, tax partner at Harbottle & Lewis, who notes a “Ever Growing Desire” Among Wealthy Families to Engage in Philanthropy: “Reputation management is a key part of estate planning, and whether or not to pay tax is now a critical issue to consider when planning the affairs of wealthy families. “

The Samsung case comes at a turning point. In May, the OECD argued that inheritance taxes could be “an important instrument to tackle inequality” in the current context of new coronavirus-induced pressures facing public finances. And a global minimum corporate tax has already been agreed by G7 governments.

“If people can do that with corporate tax, governments could look at the revenue generated and could ask if it’s possible to do something similar with inheritance tax,” says Jonathan Riley, head of private wealth management at Fladgate. “It must be interesting for governments to realize that a receipt of £ 7 billion can make a huge difference.”

Image: Jamie Coe

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