Look­ing af­ter your fam­ily’s wealth

Re­search high­lights a wor­ry­ing lack of un­der­stand­ing about in­her­i­tance tax rules

Daily Mail - - Mail Finance -

Un­der­stand­ing in­her­i­tance tax rules could ben­e­fit both you and your fam­ily, es­pe­cially at a time when more fam­i­lies than ever are deal­ing with its con­se­quences.

There are fewer more re­ward­ing feel­ings in life than know­ing you are pro­tect­ing your loved ones. How­ever, when it comes to leav­ing be­hind an in­her­i­tance for your fam­ily, a lack of plan­ning could mean the tax­man jumps ahead of them in the queue. In­her­i­tance tax is af­fect­ing more fam­i­lies than ever be­fore, with a record amount of tax re­ceipts in the 2015/16 tax year. The Of­fice for Bud­get Re­spon­si­bil­ity fore­casts sharp rises in in­her­i­tance tax re­ceipts over the next five years. In­her­i­tance tax ap­plies if your es­tate’s value is above your nil rate band of £325,000 if you are sin­gle or divorced, or up to £650,000 if you are a mar­ried cou­ple or widowed. Ev­ery­thing above this is taxed at 40 per cent and it would usu­ally fall upon your loved ones to pay it, be­fore they can in­herit what you want them to have. If they are un­able to find the money within six months, in­ter­est will typ­i­cally be charged on top.

A grow­ing prob­lem for our read­ers

Tra­di­tion­ally in­her­i­tance tax is viewed as an is­sue that only af­fects the rich­est peo­ple in so­ci­ety but it is be­com­ing more wide­spread. Most peo­ple strongly be­lieve the con­cept of in­her­i­tance tax is un­fair, but a sur­vey of those likely to be li­able found a huge lack of un­der­stand­ing about the rules. The Septem­ber 2016 re­search by Canada Life ques­tioned peo­ple aged over 45 with assets worth more than £325,000. 78 per cent of re­spon­dents be­lieve wealth should be passed from one gen­er­a­tion to the next with­out any tax be­ing due. 43 per cent ex­pect to leave an in­her­i­tance of over £500,000. 83 per cent think the cur­rent in­her­i­tance tax rules are too com­plex.

Three quar­ters of wealthy peo­ple are un­aware of new in­her­i­tance tax rules

The gov­ern­ment has acted to re­duce the num­ber of es­tates af­fected. From April, the new res­i­dence nil rate band will be in­tro­duced. How­ever, Canada Life’s sur­vey found 75 per cent of wealthy peo­ple are un­aware of the new rules. Only 4 per cent were aware that the new res­i­dence nil rate band will even­tu­ally be worth up to £175,000 a per­son (from April 2020). This is ad­di­tional to your ex­ist­ing nil rate band; which means mar­ried cou­ples will have a joint allowance of £1 mil­lion. There are cer­tain re­stric­tions that mean you might not be able to ben­e­fit from this new allowance. For ex­am­ple, you can only use it to pass on your home to a di­rect de­scen­dant such as a child or grand­child. Even if you can use it, ris­ing prop­erty prices could mean your es­tate’s value could even­tu­ally ex­ceed your nil rate band. Your es­tate is not just your home; it in­cludes other prop­erty, home fur­nish­ings, car, jew­ellery, sav­ings and in­vest­ments, mi­nus any li­a­bil­i­ties like a mort­gage. When you to­tal up the value of your es­tate, you might be sur­prised by how much it is worth. Fu­ture rises in the value of your assets could also have an im­pact.

Help avail­able to our read­ers

Canada Life’s re­search dis­cov­ered only 27 per cent of peo­ple with an es­tate worth more than £325,000 have sought fi­nan­cial or pro­fes­sional ad­vice.

With some care­ful plan­ning, you can ac­tu­ally ad­dress in­her­i­tance tax so your loved ones do not face an un­ex­pected shock. As this is a com­plex area and the rules are not widely un­der­stood, we are de­lighted to have part­nered with Skip­ton Build­ing So­ci­ety to of­fer read­ers ac­cess to per­son­alised fi­nan­cial ad­vice.

By con­tact­ing Skip­ton, you can ben­e­fit from an in-depth as­sess­ment of your sit­u­a­tion. They will help you to es­tab­lish if in­her­i­tance tax is an is­sue you should be con­cerned by and you will hear tai­lored rec­om­men­da­tions to ad­dress your li­a­bil­ity. There is no pres­sure to act on this ad­vice.

It is im­por­tant to be aware that some IHT plan­ning so­lu­tions may put your cap­i­tal at risk, so you may get back less than you orig­i­nally in­vested. Some ar­eas of IHT plan­ning are not reg­u­lated by the Fi­nan­cial Con­duct Author­ity. Thresh­olds de­pend on your in­di­vid­ual cir­cum­stances and pre­vail­ing leg­is­la­tion, and they may change in the fu­ture.

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.