Last week's budget changed a few matters regarding inheritance tax. Here is a summary of what has changed, and how this might impact you.
1. No change to inheritance tax bands. The nil rate band stays at £325,000. This means more or less anyone can gift this sum free of tax, but gifts in the last 7 years may impact this figure. If you have property you have lived in, and are leaving all or some of the property equity to children, then you may be able to leave a further £175,000 tax free. A married couple can double up potentially to £1m. So, no change to the allowances, but because tax free sums are left the same, and property and estate values may grow etc., this in itself will raise some extra tax. Also, if you are not married, do not expect to pass on the above sums tax free - get advice as to how being unmarried may affect things.
2. Farms and business relief. Many farms and businesses can currently pass on their shares or value tax free. This is now changing so the first £1m can be given tax free, assuming your farm or business qualifies. Not all do. This is a wildcard change, because there may be things you can do to increase the maximum to £2m between two owners, but this is uncharted territory - and the rules may be tweaked due to the negative press these changes have received. So please get advice if you might be affected.
3. Capital gains tax for residential property. Many people have buy to let properties, and the rates of tax are unchanged. However, this is very relevant for Will planning still, as some people may have an estate over £1m, and have buy to lets. Get advice if your estate is over £1m.
4. Pension pots. This is a big change. At the moment, a pension is not counted towards an estate value for inheritance tax. From April 2027, they will be, and so many more estates may be dragged into inheritance tax. This may change, but if your estate is over £500k, including pension pots, then get advice.
1. No change to inheritance tax bands. The nil rate band stays at £325,000. This means more or less anyone can gift this sum free of tax, but gifts in the last 7 years may impact this figure. If you have property you have lived in, and are leaving all or some of the property equity to children, then you may be able to leave a further £175,000 tax free. A married couple can double up potentially to £1m. So, no change to the allowances, but because tax free sums are left the same, and property and estate values may grow etc., this in itself will raise some extra tax. Also, if you are not married, do not expect to pass on the above sums tax free - get advice as to how being unmarried may affect things.
2. Farms and business relief. Many farms and businesses can currently pass on their shares or value tax free. This is now changing so the first £1m can be given tax free, assuming your farm or business qualifies. Not all do. This is a wildcard change, because there may be things you can do to increase the maximum to £2m between two owners, but this is uncharted territory - and the rules may be tweaked due to the negative press these changes have received. So please get advice if you might be affected.
3. Capital gains tax for residential property. Many people have buy to let properties, and the rates of tax are unchanged. However, this is very relevant for Will planning still, as some people may have an estate over £1m, and have buy to lets. Get advice if your estate is over £1m.
4. Pension pots. This is a big change. At the moment, a pension is not counted towards an estate value for inheritance tax. From April 2027, they will be, and so many more estates may be dragged into inheritance tax. This may change, but if your estate is over £500k, including pension pots, then get advice.
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