Date posted: 3rd Mar 2020
We are expecting major changes to inheritance tax (IHT) in the March Budget following two reviews by the Office of Tax Simplification (OTS) and also a report by an All-Party Parliamentary Committee. IHT 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 IHT. 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 IHT planning would be to make use of the current £3,000 annual allowance. Gifts up to £3,000 each year are exempt from IHT. 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 IHT. Also, consider making regular gifts out of your income to minimise the growth of your estate that will be liable to IHT. Gifts out of your surplus income are not subject to IHT if properly structured and we can assist you in keeping the necessary documentation.
If any of the updates in this article raise any issues for you or your business, please contact our Tax team here or call us on 01325 349700.
Read more below:
- Will Inheritance Tax be simplified?
- Inheritance tax – Gifts out of surplus income
- Passing on the family home
Read more March 2020 tax news below:
- The employment allowance – new rules
- Yet another chancellor – Big changes in the Budget?
- Will pension tax relief change on the budget?
- Consider other tax efficient investments
- Buy new equipment before 6th april
- Don’t lose your personal allowance!
- Year-end tax planning – CGT, ISA’s and pension planning