More to Inheritance Tax

Inheritance tax advice is not widely given but some of the points to consider include wills. It is important to made a will especially when buying property. This becomes even more important if the purchase involves an unmarried couple. Then there is the question of whose name the property will be registered in.



The laws associated with this are different in Scotland; their question is one of a survivorship destination.

It is important for those on a nil rate band to made sure there is flexibility on how the family deal with the property at the time of the first death.

If the parties’ contributions to the property were unequal it might be a good idea to record contributions but legal advice will be needed for each party.

Another point is that equity release may be a deliberate part of estate planning so as to create a debt against a valuable asset.

If funds released are to be gifted they are still subject to the normal seven-year wait before becoming exempt from inheritance tax.

If parents have loaned offspring financial help to get on the property ladder a consideration point is the length of payback time involved and if there is a record of this loan documented.

It is possible for parents to have a clause written into their will that states the children, on their parents death, will not have to pay off the loan.

Halifax has Inheritance Tax map In England and Wales there are 62 postcode districts where over 25% of houses sold cost more than the combines inheritance tax threshold of £600,000.

75% of these districts are in London, Knightsbridge had 77%, St. James Park had 69% and Covent Garden had 67%. The area with the most sales of £600,000 outside London was Virginia Water, Surrey that had 52%.

Postcode districts with an average of over £600,000 number 22, 17 of which are in London.

The inheritance tax revenue was £3.6bn in 2006/07 up by £300m from 2005/06.

During 2006/07 around 33,000 estates paid inheritance tax whereas in 1997/98 only 18,000 estate paid the tax.

There are still areas in the UK where the majority of households are likely to have to pay inheritance tax nearly all these are either in London or the South East.

Inheritance Tax Changes

Over one million married couples that did not plan ahead and widows and widowers will be better off after the Chancellor in effect doubled the Inheritance Tax threshold last week.

The changes were supposed to allow 97% of estates to fall outside Inheritance Tax but it is not quite as good as thought and in some cases widows and widowers could get less than £600,000.

Until now estates above the Inheritance Tax threshold, £300,000 this year, have been taxed at 40%.

Estates passed between husband and wife or civil partners are tax-free but taxes may be payable on the death of the second person.

If a wife whose home was worth £600,000 was to die a few months after her husband 40% tax would be due on properties over £300,000 totalling £120,000. With the new rules couples can transfer the unused element of their inheritance tax allowance to their spouse when they die. If the estate is less than the combined allowances of £600,000 no tax will be payable.

In 2010 when the nil rate bands become £350,000 couples will have the combined allowance of £700,000.

Some people will have made provisions to double up their allowances but more than one million will fall from inheritance tax after the reforms saving £120,000 in death duty and costing the Treasury over £1b in lost revenue.

The rules are to be backdated allowing over three million widows and widowers to claim their late spouses allowance and their own when they die. There is no set time limit so they can claim no matter when their spouse died.

Those who will miss out include, co-habitating couples, brothers and sisters who live together, divorced and single people.

Advice from a solicitor should be taken to decide if wills should be rewritten. It is not a complicated process and should only cost in the region of £200.

Although it is more difficult after death but a will can be altered and the trust negated up to two years after the first spouse dies.

Problems could arise from giving gifts prior to death. For example, if a father was to give his son £125,000 but died less than seven years later, at a time when inheritance allowance was £250,000 meaning he would have used up half his allowance. If the mother was to die now the family could use all her allowance but only the remaining £125,000 of his. If it is difficult to know if gifts were made the Revenue can check.

£500k Inheritance Tax threshold

Proposals from LibDems have backed stopping the higher rate pension tax relief and raising the inheritance tax threshold.

A rise to £500,000 for Inheritance Tax is wanted and the seven-year rule on lifetime gifts raised to fifteen years. Stamp duty would be changed to ensuring less tax is paid on house purchases up to £500,000.

The basic income tax rate would be cut by 4p and council tax would be taken over by a local income tax.

The LibDems also want to axe taper relief on capital gains, making the tax coding easier and bringing gains on property made by non-domiciles within capital gains tax.

More to Inheritance Tax

Inheritance tax advice is not widely given but some of the points to consider include wills. It is important to made a will especially when buying property. This becomes even more important if the purchase involves an unmarried couple. Then there is the question of whose name the property will be registered in.

The laws associated with this are different in Scotland; their question is one of a survivorship destination.

It is important for those on a nil rate band to made sure there is flexibility on how the family deal with the property at the time of the first death.

If the parties’ contributions to the property were unequal it might be a good idea to record contributions but legal advice will be needed for each party.

Another point is that equity release may be a deliberate part of estate planning so as to create a debt against a valuable asset. If funds released are to be gifted they are still subject to the normal seven-year wait before becoming exempt from inheritance tax.

If parents have loaned offspring financial help to get on the property ladder a consideration point is the length of payback time involved and if there is a record of this loan documented. It is possible for parents to have a clause written into their will that states the children, on their parents death, will not have to pay off the loan.