Families should review their inheritance planning to benefit from new and increasing allowances after news that death duties in the UK hit £5.2bn for the 2017-18 tax year, the highest figure on record.
Edward Jones, from Thursfields’ Wills and Estates department, said that the steep rise in Inheritance Tax had come despite the government introducing the Residence Nil-Rate Band (RNRB) in April 2017.
Edward said: “The new RNRB, combined with the existing Nil-Rate Band – up to £325,000 per person – currently allows couples who are married or in a civil partnership to pass on an inheritance worth up to £900,000 tax-free.
Under the government’s current plans, allowances will be increased each year until 2020, when it will be possible for married couples and civil partners to pass on an inheritance of up to £1m tax-free. Although this means future Inheritance Tax receipts should be dropping, many people are not taking advantage of the new allowances as they may be unaware they exist and are extremely complex.
For instance, to benefit from the RNRB, a qualifying residence must pass on to direct descendants such as children and grandchildren, as passing on the residence to other relatives – such as siblings – means that the additional allowance will not apply.
In addition, many Wills written before October 2007 contained Discretionary Trusts purely for tax planning reasons, but since then the law has changed and these types of trust are often redundant and will not automatically qualify for the new Inheritance Tax relief.”
He said that this and other complications mean that families should seek advice from specialist lawyers, such as members of the Society of Trust and Estate Practitioners (STEP).
Edward, himself a full STEP member, added: “Even the UK Treasury has acknowledged that Inheritance Tax is particularly complex and it has requested that the Office of Tax Simplification carry out a review.
Families should invest in getting professional advice on taking legitimate steps to minimise their exposure to Inheritance Tax, as this could save enormous sums of money.”
For further advice please contact Edward Jones, STEP Practitioner on 0121 624 4000 or email firstname.lastname@example.org