You will have heard the prime minister’s speech yesterday about “painful” tax rises in October when the new Government has its first budget. The Chancellor has ruled out increases in Income tax, National Insurance and VAT so that only really leaves Capital Gains Tax (CGT), Inheritance tax and pensions.
So what could that mean for you?
Inheritance Tax receipts for April 2024 to July 2024 are £2.8 billion, which is £0.2 billion higher than the same period last year. Inheritance tax allowances have remained frozen for a number of years so it is not surprising that receipts have increased as property values and financial markets have increased in value.
It is possible that certain reliefs, such as business relief and agricultural property relief, which are considered by some as “too generous” may be removed or amended. Also, defined benefit pension pots could be brought into a person’s estate for inheritance tax.
The government might also be considering raising the rate of inheritance tax, which is currently 40% for estates over the nil rate band and residence nil rate band thresholds. Currently, the rate is 36% for estates where 10% or more of the estate is given to charity. Perhaps that discount will be removed.
Most professionals operating within this arena would like to see the inheritance tax regime simplified, but without penalising business owners.
For now, there may be very little you can do about some of these possible changes because of the uncertainty. If you have been thinking about inheritance tax planning and moving wealth down to the next generation via trusts or pensions, the best thing you can do is seek advice from an experienced, qualified and trusted advisor – be that your solicitor, your accountant or your financial advisor (or better yet all three together).
Absolute gifts can be useful to pass down wealth to the next generation as part of your inheritance tax planning, unless they trigger Capital Gains Tax (CGT), but that is for another blog!
At Brethertons Solicitors, we are your experienced, qualified and trusted advisors. Our friendly and award-winning team are ready to guide you seamlessly and carefully through this new legislation to ensure you make the best decisions for you and your loved ones. We are here for you with the aim of making this complex area of law simple and navigable for you.
Please contact us by email to info@brethertons.co.uk.
