Trust, Estate and Family - 10 Jul 2015
Thousands of families could miss out on the government’s proposed changes to Inheritance Tax (IHT). This is a headline that caught our attention recently.
In Chancellor George Osborne’s 8 July 2015 UK Budget, he confirmed that there will be a change to IHT rules providing greater relief to families passing on the family home to relatives.
The new rules allow a married couple to pass a property worth up to £1 million to their children and avoid IHT in the process. This is achieved because the ‘residence allowance’ of £175,000 will allow homeowners to extend the existing IHT threshold of £325,000 up to £500,000. For married couples, this means a combined figure of £1 million.
So far; so good? Well yes, this is great news for many families around the UK, but a real blow to thousands of others who have already sold their family home.
To ensure you benefit from the opportunities created by the provisions in the Budget, we are encouraging all our clients to review any estate planning documents that are already in place.
We are telling people to pay particular attention of documents with dual trust structures, to take account of the different IHT and US estate tax thresholds, as these could require amendments to take advantage of this new UK tax break.
Our advice is underlined in an article that appeared on The Money Pages website last month. Citing research conducted by NFU Mutual, and according to data from HM Revenue & Customs, the article revealed there are thousands of ineligible estates without property that are still obliged to pay annual IHT fees.
Sean McCann, chartered financial planner at NFU Mutual explains that the proposed changes show the government recognises the existing IHT threshold is too low. However, he suggests that because ministers have decided to “tinker with the rules around who can benefit and who can’t” we have ended up with an unfair system.
And for those welcoming the proposed changes, McCann also had this warning: “Under the new proposals, we could soon start to see more elderly people reluctantly house-sitting for the next generation or even upsizing to make the most of this potential tax break. The wider effects on the property market could be significant.”
If you want to know more about IHT planning – or have any questions about your finances in general – get in touch with the team at Frank Hirth.
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