Benjamin Franklin is quoted as saying “… in this world, nothing can be said to be certain, except death and taxes…”.
This statement has particular relevance to Inheritance Tax (IHT) and even though it can be true, conversations relating to IHT often only take place during the most difficult time in our lives. I know this from recent personal experience, and I think that is why the following resonated so much with me.
I recently read an article in the Money section of the Sunday Telegraph, which highlighted a crackdown by HMRC on IHT, and whilst I was not surprised by the approach taken by HMRC, the amounts referred to in the article as now being liable for tax – circa (£600m) were very large.
The article focussed on transferring property wealth, actions which were subsequently deemed ineligible by HMRC, and although I think action and planning is welcome, it seems clear to me, that good financial planning advice (if given) had not been followed in these cases.
With the standard inheritance tax rate at 40%, it can prove expensive. The current Inheritance Tax threshold limits are £325,000 per person (which is transferrable). You may also qualify for a further allowance of £175,000 if your home is passed onto your direct descendants – children (including adopted, foster or stepchildren) or grandchildren.
This could push the tax-free threshold up to £500,000 per person (providing your estate is less than £2m). This may sound a lot of money, but with the recent rise in property prices, and the rise in the value of assets, more and more people may be affected by IHT.
Estate planning is a complicated area and, whilst the issues discussed in the article I mention were primarily associated with gifted properties, IHT in general does seem to be receiving increased levels of scrutiny from the tax authorities.
Receiving the right advice in this area is key, and as part of the comprehensive financial planning services we provide, detailed estate plans are included. These identify any potential liabilities and allow us to discuss the planning options available.
Our job is to ensure that our clients are as prepared as they can be for such eventualities, that they have taken advantage of all the planning available to them, and feel fully in control of their financial circumstances.
If you would like to discuss estate planning, or any other part of our comprehensive financial planning, please don’t hesitate to contact me on 07910 530 050 (mobile), 0161 969 1703 (office) or email [email protected]
Article by Simon Baggott DipPFS, Financial Planner, Suttons IFA 2021