Despite the considerable falls in asset values in recent months, the preceding few years have seen considerable increases in both property and in stocks and shares, in many cases leaving people with much larger levels of personal wealth than those experienced by previous generations. As a result, we have also seen a substantial increase in the profile of Inheritance Tax.
At one time this tax was considered by many to be a problem for the rich only, but more and more people are realising that it is likely to affect them and their families. The Nil Rate band, over which tax becomes payable on death, has barely increased above the rate of inflation in recent years, whilst at the same time property prices have soared and in very many cases just the value of one’s home exceeds the Inheritance Tax threshold.
With IHT payable at the rate of 40% on the full value of all chargeable estates in excess of the Nil Rate band, the potential tax liability for many families will be substantial.
The changes introduced by the October 2007 Pre Budget Report and the 2008 Finance Act has alleviated the potential liability for married couples in many cases, by allowing any unused Nil rate Band on the first death to be transferred and utilised by the surviving spouse. However, there are a number of requirements that need to be met and a number of items of documentary evidence that need to be produced to claim the transfer of that unused Nil Rate Band.
We therefore recommend that you contact us to see what impact the changes will have on your own position and to ensure that the relevant paperwork is collated and retained. There may well be considerable passage of time between the death of the first spouse and their surviving partner, with the risk of the loss of some items of evidence that will be required to claim the relief.
We believe that our experience in providing day to day financial advice over so many years, combined with our extensive knowledge of this complex tax, can be relied upon to reduce the Chancellor’s potential share of your hard earned wealth.
Please talk to us about how you want to pass funds on to your loved ones, so that your intentions can be put into effect, and remember that your options are not as complicated as many would lead you to believe. A trouble shared with the right person is always a trouble halved and that applies to Inheritance Tax equally as much as with other day to day issues.