What will the inheritance tax changes proposed by the Labour party mean to you? Please see a view from our tax advisor with over 17 years experience.
Estate Planning Myths That Just Won’t Die!
Estate planning remains probably the most misunderstood area of Financial Planning. Some clients think they just need a little Financial Planning but not any Estate Planning. Some consider themselves too old or too young to even think about it. Policy changes from HMRC that hit the headlines do nothing to inspire confidence in a notoriously complex system.
What Is Inheritance Tax?
Inheritance Tax (IHT) is a tax on the transfer of assets from one person to another. It is usually encountered when someone dies, and they leave their Estate to either one individual or a range of beneficiaries. However, lifetime gifts also have IHT consequences. The rate of IHT is generally 40%.
Tough New Tactics from HRMC
Attachment of Earnings Order – new agressive tool
Getting people to pay HMRC the money they owe has always proved to be tricky. In 2016 it spent £24m on private sector debt collectors but in 2017 the figure soared to £39m. HMRC now has a new, more aggressive tool at its disposal, known as an Attachment of Earnings Order. These are being used alongside the feared Accelerated Payment Notices (APNs).
Could Inheritance Tax be abolished?
Rumours are swirling that Inheritance Tax may perhaps be abolished. It is tricky to navigate the current IHT regulations and many adults admit they find it baffling. Despite the ability for a couple to pass on £850,000 free of IHT, receipts this year increased by 8% to £5.2 billion.
Conservative Party propose a “Family home allowance of £175,000”
The Conservative party have announced that if they are re-elected, then from April 2017 parents would each be offered an additional £175,000 “family home allowance” to enable them to pass property on to their children tax-free after their death.
Investments To avoid Inheritance Tax Changes
New tax legislation has been introduced in the UK to restrict the use of certain types of debts for Inheritance Tax (IHT) purposes. The restriction on the use of debts may apply in 3 different circumstances for chargeable IHT events on or after 17 July 2013.
8 Steps to the basics of how to avoid Inheritance Tax
1. Ensure you write a Suitable Will.
A “Will” will help direct assets but it will not protect assets. That being said, it makes sense to make sure you have a proper Will in place and it has been written by an experienced practitioner otherwise there could be a claim on your estate made by any person who believes they have a right to assets from your estate. This is particularly important when you have children from a previous marriage or children you are intending to cut out of your estate or previous spouses, etc.
File your tax return on time!
In the past as long as you paid your tax liabilities on time and cleared any self-assessment tax due by 31 January, no late filing penalties were due. Even if you failed to pay your tax on time, late filing penalties were capped at £100 or nil if you were due a tax refund.