What did you think of the budget? The Chancellor’s speech contained few surprises, some disappointments and one area of future concern for those watching for Inheritance Tax changes.
As many are aware Inheritance tax (IHT) is charged on estates in excess of £325,000. There was much speculation and rumour prior to the budget that the Chancellor would increase this nil rate band allowance significantly to £500,000 which would have taken many estates out of tax completely. The Chancellor failed to do so however and the band remains fixed at £325,000.The excess above this is taxed at 40%.
This was disappointing news and there was a further concern for budget watchers. The Chancellor signalled a review of deeds of variation. These are a legal arrangements which can be entered into within 2 years of a death effectively to ‘re write’ a will. They are a useful family tax planning tool and perfectly legitimate. The signs are that the Chancellor sees such deeds as a target to rake in more IHT in the future.
It is vital to ensure your affairs are in good order.
You can look to mitigate or reduce your IHT bill and pass as much of your estate to your family as possible by taking tax advice now and making sure your will, and financial arrangements as a whole, reflect that advice.
- Consider making full use of the annual gifts allowance
- Make full use of the double allowance of £650,000 for spouses and civil partners
- Use the 10% charitable gifts exemption
- Have up to date wills.
- Make use of potentially exempt transfers