“No longer fit for purpose”?
Inheritance Tax (IHT) remains unpopular with the general public and has been the subject of a long-running campaign in a national newspaper calling for its abolition. That’s a lot of attention for a tax that was paid by only 3% of estates in 2008/09 and raised just 0.5% of all tax revenue in 2009/10.
The recent Mirrlees Report, published by the Institute of Fiscal Studies, has concluded that “Inheritance Tax is no longer fit for purpose.”
FPC Financial Planner, Paul Welsh has explored the implications for our clients and shares his findings below:
This report attempted to explore and define the characteristics of a good tax system and then went on to recommend various changes that would affect estate planning strategies, including the following:
- Replace IHT with a ‘wealth transfer tax’, whereby any gift made by an individual during their lifetime or upon death is subject to a tax charge.
- As an absolute minimum, the exemption for business property and agricultural property should be restricted. It currently enjoys a 100% relief in most circumstances.
- The capital gains tax exemption that applies on death (where the ‘cost’ value of an asset is rebased to its value at the date of death) should be removed.
Policymakers may well disregard this independent academic study, but given IHT’s unpopularity, it is easy to envisage that politicians may attempt to curry favour with voters by making major changes to the IHT system.
In addition, the recommendations in this report follow an analysis by the Office of Tax Simplification, which states that IHT requires a complete overhaul. The call for change, therefore, appears to be gathering steam!
Anyone who is contemplating estate planning strategies such as gifting programmes, business exit planning and trust planning, may well be wise to take advantage of the current exemptions whilst they still exist.
Estate planning is always on our ongoing review agenda, but do call us for guidance now if you feel you need to understand your position and options in more detail.
Also remember, if you have friends or clients with similar concerns, we can help them too, so encourage them to visit our services
And help children learn the value of money
According to new research produced by Clydesdale and Yorkshire Banks – almost half of parents believe that teaching children the value of money is one of the most important lessons in life but very little financial education takes place at school.
Teaching a young person to operate and manage their finances with a day to day bank account is a good place to start and from 1st November, millions of children (aged under 18) also became eligible for a Junior ISA, which replaces the Child Trust Fund (CTF).
An overall annual limit of £3,600 per tax year can be invested and this limit will rise annually in line with inflation, starting in the 2013/14 tax year.
The account is opened by the person with parental responsibility for the child and from age 16 they can manage the investment until they assume full ownership from the age of 18.
Anyone starting to twitch yet?!
Letting the head rule the heart
This year’s wedding season began in royal style when William and Kate tied the knot on Friday. We may never know whether a pre-nup is protecting the family jewels, but nowadays many people (and not just celebrities) are entering into Pre-nuptial Agreements. This is particularly true when there are substantial existing assets, an inheritance or a potential inheritance, children from a previous marriage or a requirement to ring fence a particular asset.
Pre-nups…only for the rich and famous?
We have had a steady stream of enquiries from clients and their children in recent months about this issue and also about the role of Co-habitation Agreements for young people moving in together, so we asked leading family lawyer, Elizabeth Hassall of Gateley Solicitors to share her views about pre-nups – what they are and why it’s sometimes important to let the head rule the heart. Read more