Quarterly Newsletters
Inheritance Tax The Chancellor announced, on the 9th October 2007, that the Inheritance Tax allowance would be transferrable between husband and wife. Most reports instantly got this wrong by announcing that the nil rate band had increased to £600,000; it hasn't.In the past, unless either the husband or wife in a married couple (or equivalent in a civil partnership) passed their nil rate band outside their estate more than 7 years before their death, then this allowance would come back into calculation and therefore effectively be lost. Whilst each individual had a £300,000 allowance, it was not transferable between partners as above. What has changed is that now it is transferable. Immediate implications are that, for example, where a house is worth £600,000 and is jointly owned, there is no longer any need to sever joint tenancy and effect Discretionary Will Trusts in favour of the family with the remaining spouse having the right to remain in the property, as the unused £300,000 nil rate band of one spouse can be transferred to the other.It was also announced that this would be retrospective for widows and widowers. It is still not transferable between co-habitees and single people still only have a £300,000 allowance. If you are divorced and not widowed, your nil rate band is still £300,000. Even if that means that fewer people will now be caught by Inheritance Tax, the way house prices have soared over the last few years, especially here in Norfolk and Suffolk where we operate predominantly, means that relatively modest households can still be affected. Let us not fool ourselves - Inheritance Tax is still a complex area where you need professional help. Contact us for specialist guidance. Inheritance Tax affects more and more people, most of whom never dreamed that their "estate" was an "estate", nor that the family home that they had sometimes struggled to keep together would one day be a source of revenue for the Exchequer rather than a source of wealth that they could pass to their children and grandchildren. Everyone has an Inheritance Tax nil rate band of £300,000 (2007/2008 tax year). This will increase to £350,000 by 2010. In addition there are annual allowances which haven't changed for years and whilst they haven't become exactly meaningless, they have faded in significance:- £3,000 can be given each year to anyone (you can "mop up" 1 years unused allowance £250 can be given to any number of people (but not to the recipient of the £3,000) You can make some generous wedding gifts £5,000 to your children £2,500 to your Grandchildren £1,000 to anyone else Payments for the maintenance of your spouse, ex-spouse, dependent relatives and, usually, your children who are under 18 or in full-time education will also be exempt from Inheritance Tax.