SPA UK Sandesh 2017 - Page 3

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: dipesh.shah@sjpp.co.uk 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