We, mortals, are left to the whims of politicians when it comes to inheritance taxes. It is a morbid thought, a toss-of-the-coin-countdown to when you think you may kick the bucket (KTB).
However, Chancellor Javid made some musings over cutting inheritance tax (IHT) at the recent Conservative Party Conference. Or at least he shared his understanding over why most of us get frustrated over being liable, even in death, to pay for taxes on things we have already paid taxes on.
To hear his exact words, listen to the interview here.
The Office of Tax Simplification (OTS) has proposed a significant reform of the inheritance tax system, suggesting that the seven-year period during which a lifetime gift may become subject to inheritance tax (IHT) is “too long” and should be reduced to five years, according to a report in the ICAEW online magazine, Economia.
The OTS report also recommended that the current taper relief system, which is applied to lifetime gifts, be abolished.
The unpopularity of IHT resulted in the OTS receiving more responses to its request for views on the tax than for any other review it has carried out, reported Economia.
However, gifts of business property and assets and anything remotely agricultural differs from your typical IHT rules, such as those related to property. To learn more about gifting business assets, read more here.
For example, in the case of gifted business assets, you may have to pay Capital Gains Tax or Income Tax if you sell, give away or exchange (‘dispose of’) an asset or property if it’s gone up in value during the time you owned it.
And if you haven’t chosen exactly where you will retire (many Brits venture to sunnier climes overseas), get quality advice or do your research when the time comes on how assets, business or personal, will be charged with IHT, depending on not only where your assets reside, but also where you spend most of your retirement.
Those that can gift ahead, you are the lucky ones, as many of today’s retired have been squeezed financially already (by the ones they hope to leave the lot). Either way, keeping up-to-date on IHT well in advance of any vision you may have on when you may KTB, is wise.
A legacy for your loved ones to share from generation to generation is to be valued, especially if a family business is involved. But if the kids tell you to just live life to the full by selling the lot and moving to an island retreat before the arthritis kicks in, there is that option, too.