Inheritance Tax- What Will My Children and Beneficiaries Have To Pay When I Die?
The major row over the recently leaked information from the so called ‘Panama Papers’ has brought into focus the issue of the UK’s Inheritance Tax laws and what it means for hard working people who want to pass on their assets to their families when they die.
While the Prime Minister David Cameron and other senior politicians such as Chancellor George Osborne and Labour Leader Jeremy Corbyn have had to come clean and reveal their tax returns, the details of Cameron’s inheritance from his father’s tax haven business interests and a gift of £200,000 that was given to him by his mother have raised quite a few ‘media eyebrows’.
Greer Woolley, a Wills Trust and Probate specialist from leading regional and award-winning law firm Pictons says “Actually only a small percentage of the population in the UK have to pay Inheritance Tax and it doesn’t raise much income for the nation’s coffers as a whole.
“Of course, Inheritance Tax is a worry for many people because of soaring property values but the amount you are allowed to leave someone before you have to pay the 40% Inheritance Tax is actually quite reasonable and better for married people or those in civil partnerships.
“According to statistics only 40,100 families, or approximately just 8% of estates will have to pay any IHT at all in 2016/17. Of course this can be crippling for owners of huge estates and stately homes but for most of us it’s not a problem.
“The Chancellor George Osborne has recently made changes to IHT law which he was unable to do during the years of coalition government. It’s quite straightforward – if you leave assets worth more than £325,000 to your descendants then they will have to pay tax at 40%. However, married or civil partners can transfer their assets between each other without having to pay tax, so if one of them dies the other automatically inherits the other’s allowance, effectively doubling the inheritance allowance to £650,000.
“The law is set to change next year, from April 2017, when a new Transferable Main Residence Allowance (TMRA) will be introduced. Initially this will be for £100,000 and by 2020/21 it will have risen to £175,000. This means that people can leave their property to their descendants free of tax for up to £425,000 for a single person and couples by £850,000. By 2021, the tax-free limit will be £500,000 each, or £1m for married or civil partners.
“Of course parents can set up Trusts for their children but Inheritance Tax is still liable, mostly at 20% on money or property if it exceeds the legal allowance when it is placed in the Trust. If the parent who has set up the Trust dies within seven years of passing on the financial gift, an additional 20% is charged, to equal the 40% non-trust rate. In the case of the Prime Minister, who apparently was given a £200,000 gift by his mother, as long as she lives for seven years since she gave David that gift he will not have to pay any tax on it.
“Also, Trust assets tend to be re-assessed every ten years to take into account their changing value. As the law stands, as long as you survive for seven years after giving away your money, possessions or property, the recipient(s) will not have to pay any Inheritance Tax.. There are varying degrees of tax on Trusts and Gifts and it’s a good idea to get advice from a qualified financial advisor on your best course of action.”
If you need any advice or help surrounding Trusts then please contact Greer or one of her team on 0800 302 9448 or email firstname.lastname@example.org