As we continue to adapt to life during a Global pandemic, it is understandable and clear that many people are using this time as an opportunity to look ahead and accelerate their Inheritance Tax (IHT) planning.
Naturally, health and life expectancy may be one of the triggers for this, but we must be mindful about how some of the current Government financial help may ultimately be recouped.
We’re not forecasting a definite rise in tax rates alongside a review or reduction in certain allowances (Residence Nil Rate Band or gifting rules), however it might be relatively straightforward and consistent with government policy to make changes that could recover some of the help provided to individuals and businesses.
With this in mind, here are 5 reasons you may wish to review and discuss your own Inheritance Tax (IHT) plans:
5 reasons to accelerate your IHT planning
- The Chancellor’s second Budget, planned for October 20, may not be so benign regarding IHT, as current allowances may be reduced or removed, particularly the Residence Nil Rate Band which appears totally incompatible with Boris Johnson’s desire for a “levelling up” across the country. Gifting allowances could be reduced or the time period before the gift falls out of your estate extended to 10 years
- If you are contemplating gifting or selling a property or shares, current values may be lower and therefore any possible Capital Gains Tax liability on the sale may have reduced.
- Additionally, if you now have various losses within any of your investment portfolio, can you use these, alongside your annual capital gains tax allowance, to offset gains elsewhere and realise funds that could then be used to kick start any Inheritance Tax planning?
- The multiple potential benefits (Multi-generational planning, IHT planning, Care fees planning) of using lifetime flexible family Trusts may have even more attraction under the current climate?
- If one of your children needs funds now, for example if a business is struggling, how will you plan or balance any help to your other children? We’d suggest a review of your Will and overall financial plans to model how this may best be achieved.
Conversely, the current crisis may necessitate a review of gifts you had planned and not yet made, to assess whether these remain affordable.
As always, fundamental modelling and stress testing of your plans and intentions is critical and something we’d highly recommend.