Former Labour Chancellor Roy Jenkins famously described Inheritance Tax as:
“A voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue.”
Inheritance Tax is now nearly 35 years old, but the comments made by Jenkins back in the day still hold a kernel of truth. Judicious planning can reduce if not eliminate inheritance tax liabilities and we are here to help.
There are various exemptions, which can be claimed both during life and at death.
The lifetime exemptions have not increased since the tax was introduced in the mid-1980s, and their quantum can today seem somewhat stingy. However, using the exemptions year on year can make a noticeable difference to the IHT due at the end of the day. For example, the Annual Allowance of £3,000 may not seem a lot but if a couple utilise it every year for 25 years, then an IHT saving of £60,000 may be made.
A list of these exemptions is included at the bottom of this blog – please contact us if you have any queries, as the application is not always straightforward.
It is also important to ensure the correct reliefs are claimed after death.
One currently important exemption that must be claimed, as it is not given automatically, is the exemption for emergency service workers.
This covers a wide range of activities but, importantly as we navigate the Covid-19 pandemic, NHS medical staff are included. Whilst we hope that our clients will not be affected by this exemption, we equally hope that they will ensure they get the right advice if they, or their families, are in the sad position to have recourse to it. The full list of people entitled to this exemption is as follows:
- a person employed, or engaged, in providing fire services or fire and rescue services;
- a person employed, or engaged, in search or rescue services (or both);
- a person employed, or engaged, in providing medical, ambulance or paramedic services;
- a constable or person employed for police purposes or engaged to provide services for police purposes;
- a person employed, or engaged, in providing services for the transportation of organs, blood, medical equipment or medical personnel; or
- a person employed, or engaged, by a government, international organisation or charity in connection with the provision of humanitarian assistance.
There is also a relief called “Quick Succession Relief”, which may apply if assets become liable to IHT twice within a five year period due to death. Again, the unprecedented circumstances we currently find ourselves in may mean that this relief is more useful than usual.
Please do not hesitate to contact us if you have any queries about this difficult subject.
IHT Exemptions – it is important that you take further advice before relying on these exemptions
- Gifts to your spouse or civil partner (but there are extra rules if the done is non-domiciled in the UK)
- Annual Exemption of £3,000 per tax year
- Small Gift Exemption of up to £250 per tax year to any number of individuals
- Normal Expenditure out of income
- Gifts made in consideration of marriage
- Gifts to:
- Certain political parties
*The information contained in this blog is for general information purposes only and should not be relied on or treated as a substitute for specific advice relevant to particular circumstances. Please contact us for professional guidance to your individual case.