Inheritance Tax – You Could Be Overpaying By Up To £80,000
Changes to inheritance tax (IHT) that came into place in April 2017 mean that those with an estate between £650,000 and £2million could leave their loved ones with an IHT bill of up to £80,000 more than necessary, according to Eleanor Holland, Partner in the Private Client team at our Solihull office.
As a simple example… if dad died before or after 5 April 2017 and mum died after 5 April 2017 with an estate worth between £650,000 and £2m and if your current will contains a trust you could potentially lose the additional allowance.
Putting properties into trust has long been a tax efficient way to pass them down the generations, but these new rules mean that an alteration to the will may be required in order to benefit from this tax break.
Eleanor comments – “Not everyone is entitled to it. It only comes into play when passing properties between direct descendants such as spouses, civil partners, children, step-children, adopted children or grandchildren”.
This additional Nil Rate Band (RNRB) has been introduced where a residential property is left on death to direct descendants. It is being phased in over the next four years bringing the potential tax saving up to £140,000 by 2020/21.
The tax saving can only be set against residential property, not other assets within the estate. Additionally, the property needs to have been used as a residence by the deceased at some point, although not necessarily be their residence when they died.
Only one residence can be taken into account. If there is a liability charged against the property such as a mortgage that will reduce the value of the property available for the enhancement to be set against. Unused portions of the reduced RNRB can be transferred between spouses and civil partners.
We offer our clients an efficient, friendly service where they can see somebody face-to-face who will handle their wills, Lasting Powers of Attorney, and trust and probate needs from beginning to end.
If you would like any further information please contact Eleanor Holland at The Wilkes Partnership on 0121 733 8000 or [email protected]