Increase in Inheritance Tax Threshold?
Following a rather surprising victory at the recent General Election, it is now time for the Conservative Party to begin making their manifesto pledges a reality.
One of these pledges is to increase the Inheritance Tax Allowance for each individual to £500,000. This sum will include a transferable main residence allowance of £175,000. Treasury Minister David Gauke MP has confirmed this election promise and stated that through the introduction of the transferable main residence allowance it will ‘take the family home out of Inheritance Tax for all but the richest’.
In addition to the main residence allowance will be the nil rate band (Inheritance threshold), currently amounting to £325,000. Any unused main residence allowance or nil rate band can be transferred to their surviving spouse, which is inline with current legislation and would mean that on the death of the surviving spouse the overall Inheritance Tax threshold could be as high as £1 million. Whilst this would avoid many estates from paying Inheritance Tax on the second death, it will only be available in certain circumstances and as ever, the devil will be in the detail… we will provide further guidance on this as that detail becomes more apparent.
Whilst the government is looking to increase the available Inheritance Tax Allowance for each individual, they are also reviewing how Deeds of Variation are being used for tax planning purposes and it is suggested that a report on this may be available in the Autumn.
A Deed of Variation, is a document made by a beneficiary of an estate to redirect gifts to another person, that they would otherwise have received under the terms of the deceased’s Will or the intestacy rules. If that Deed is made within 2 years of the date of death and certain other formalities are complied with then it can be a very useful Inheritance Tax planning tool; it will be as though the gift in the Deed was made by the deceased’s Will and not the original beneficiary. However, Deeds of Variation are not used simply for Inheritance Tax planning, but also to provide for others whose needs are greater than those of the original beneficiary.
If you need any advice with regards to Inheritance Tax please contact Rebecca Suthers via email Rebecca.Suthers@ellisjones.co.uk or call 01425 484848.