A DV E RT I S I N G F E AT U R E
Insights into
Inheritance Tax planning
B
ritain has some of the highest death
duties of any country 1 . Beneficiaries
have to pay 40% tax on each extra
pound that is inherited above the nil-rate band
of £325,000 (£650,000 for married couples or
civil partners). However, the rules are not straightforward and
not everyone will gain. While the new allowance
is consistent with the government’s pledge to take
most family homes out of IHT, it’s also consistent
with the former chancellor’s fondness for finding
complex solutions to simple problems.
Yet the Conservative government has long
promised to reform these so-called ‘death
duties’. In October 2007 the then shadow
chancellor George Osborne announced that,
if a Conservative government came to power,
it would raise the IHT threshold to £1 million.
However, the new government’s first Budget in
June 2010 did not contain any such proposal
and, over the five-year parliamentary term, the
tax was left largely unchanged. Consequently,
the former chancellor announced that, from
April 2017, a new dedicated tax-free allowance,
then called the ‘main residence nil-rate band’,
would be introduced to specifically help protect
a residence from IHT. For example, the new allowance only applies
to a residence that is passed to children and
grandchildren (including adopted, foster and step
children), not to other family members. So those
who do not have children cannot benefit from an
increased allowance. What is more, unmarried
partners cannot pass nil-rate bands to each other,
meaning they can only have one £325,000 nil-
rate band, and one £175,000 residence nil-rate
band by 2020/21. This gives those individuals
a maximum total allowance of £500,000.
Standing by
The new allowance is totally separate from the
existing nil-rate band, as it will only apply on
transfers of a residence to direct descendants.
It began its phasing in at £100,000 from April,
increasing in £25,000 increments annually to
£175,000 in 2020/21. From then on, it will
increase each year in line with the Consumer
Prices Index.
Like the existing nil-rate band, any unused
fraction of the new allowance may be transferred
to a surviving spouse or civil partner. Given this
option, a couple could potentially have a total
IHT tax-free limit of £1 million from 2020/21.
Mr Dipesh Shah DipPFS, MSc, BA
(Hons), Director of Oakdale Financial
Services Ltd is based locally and is
inviting readers to discuss their concerns
and discover the opportunities that
are available.
An Insight into Inheritance Tax
Planning seminar is being held on
13 February 2017 at Stanmore Golf
Club, Stanmore, commencing at
7.00pm with a drinks reception
followed by a light warm meal and
seminar talk to close at 9.30pm.
Additional dates and venues are
available upon request.
Due to seating/capacity limitations,
reservations will be given on a first
come basis.
Furthermore,
the
allowance
is
progressively withdrawn once an
estate tops £2 million (after deducting
any liabilities, but before reliefs and
exemptions such as Business Relief).
The rate of withdrawal is £1 for every £2
over the £2 million limit. Thus an estate
worth £2.2 million in 2017/18 will have
no residence allowance at all.
There will be many people who will be unable
to take full, or indeed any, advantage of the
additional allowance. For these individuals,
lifetime gifting, trusts, charitable giving and
other allowances will remain vital components
of estate planning.
The levels and bases of taxation, and reliefs from
taxation, can change at any time. The value of any tax
relief depends on individual circumstances.
Call 020 8150 7565 for more information
or your complimentary guide to
wealth management.
Trusts are not regulated by the Financial
Conduct Authority.
www.taxfoundation.org, March 2015
1
OAKDALE FINANCIAL SERVICES LTD
Tel: 020 8150 7565 Mob: 07960 568644 Email: [email protected] Web: www.oakdalefinancialservices.co.uk
The Partner Practice represents only St. James’s Place Wealth Management plc (which is authorised and regulated by the Financial Conduct Authority) for the purpose of advising solely
on the Group’s wealth management products and services, more details of which are set out on the Group’s website www.sjp.co.uk/products. The ‘St. James’s Place Partnership’
and the titles ‘Partner’ and ‘Partner Practice’ are marketing terms used to describe St. James’s Place representatives.
H2SJP27863 12/17