05 Mar Inheritance Tax in the Spotlight
We are expecting major changes to inheritance tax in the March Budget following two reviews by the Office of Tax Simplification (OTS) and also a report by an All Party Parliamentary Committee. Inheritance tax is perceived as a complicated tax with numerous fairly trivial reliefs and exemptions. Currently the tax only generally applies to transfers on death and gifts within 7 years of death. The All Party Parliamentary Committee suggested that there should be a 10% charge on gifts during someone’s lifetime after an annual exemption (suggested £30,000) has been exceeded.
A more radical suggestion was the abolition of Business Property Relief (BPR) and Agricultural Property Relief which currently allow a family business or farm to be passed on without paying inheritance tax. The OTS also recommended a review of BPR so it may be worth considering bringing forward the transfer of all, or part of, the family businesses.
More routine inheritance tax planning would be to make use of the current £3,000 annual allowance. Gifts up to £3,000 each year are exempt from inheritance tax. If you haven’t used your £3,000 allowance from 2018/19 you can make gifts of up to £6,000 before 6 April 2020 without the gift being liable to inheritance tax. Also consider making regular gifts out of your income to minimise the growth of your estate that will be liable to inheritance tax. Gifts out of your surplus income are not subject to inheritance tax if properly structured and we can assist you in keeping the necessary documentation.