01 August 2003
Wyn Jones of McCartneys
Remember Death Duties? well they are back in the guise of Inheritance Tax (IHT) but they don't just affect the wealthy. Actually they never went away but what has happened is that like Stamp Duty the threshold from which the tax becomes payable has in real terms dropped and not risen in line with the increase in property prices.
For example how many properties in the UK come under the stamp duty threshold of £60,000? Similarly with IHT what was once the territory of the rich is now part of the ordinary persons life.
Briefly, any transfer of goods or property is liable to IHT at a rate of 40% there is however a £255,000 threshold below which no tax in payable.
What has materially affected this threshold in recent years is your property. By today's standards your property does not have to be anything special to be worth more than £255,000 and so when transferred to your beneficiary IHT automatically kicks in. Couple the property value with the house contents, any investments (PEPS & ISA'S are included in the totting up procedure) and savings the taxman may find that he gets a tidy sum from your estate. In fact I read somewhere that an estimated £2.2 million goes to the taxman in this way every year.
So organise your affairs. Efficient tax planning is the order of the day. There are numerous ways to minimise your tax liability for example gifts of any amount do not attract IHT if you live for 7 years after the date of gift. Then there are the Gift, Loan and Will trusts all of, which are vehicles to help ensure that your tax liabilities are minimised.
Don't get caught out. If you remember one thing from this article its get professional advice from your solicitor, accountant or chartered surveyor.
The pity is that as more and more people fall in the IHT bracket less and less fail to take advantage of legitimate ways available to them of managing their finances so that the money they have worked hard for all their life and on which they have already paid tax goes to the people they love and not the taxman who is waiting in the shadows.
Wyn Jones is a partner of McCartneys, Property Agents and operates from their Ludlow, Tenbury Wells & Cleobury Mortimer offices. For further information on Property Matters he can be contacted on Tel 01584 872153 or firstname.lastname@example.org
The original article can be read here.
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