Inheritance tax - what we already know
Besides a specific anti-avoidance measure aimed at schemes that seek to exploit the excluded property rules, and two consultations due in the summer covering non-domiciles and relevant property trust taxation (see our Budget Summary Impact) - the recent Budget didn't provide any sweeping changes to inheritance tax (IHT). Finance Bill 2012 does, however, contain previously announced measures from Budget 2011:
- a reduced IHT rate of 36% for estates leaving 10% or more to charity. See our article 'The mutual benefits of charitable giving' - for further details including an example showing how this will operate. In addition, HMRC has recently issued guidance, together with a calculator to establish whether an estate will qualify to pay tax at the reduced rate
- the IHT nil-rate band remains frozen at £325,000 until 2014/2015, after which it increases in line with any increase in the Consumer Prices Index (CPI). As asset values start to recover, more estates will be affected by IHT and now is an ideal opportunity to discuss IHT planning with clients. In particular advisers should be focusing on the use of exemptions, lifetime planning, discretionary will trusts and deeds of variation depending on clients' circumstances. Our article 'Freezing the nil rate band heats up the need to plan' - has more information.
