New Inheritance Tax threshold for couples

DavidLaGuardia

localhero wrote: »

I'm sorry Davidlaguardia,

I don't follow what point your making at all, and where does CGT come into any of this?

You stated that it was not tax efficient to make use of the nil rate band on the first death.

Either
Beneficiaries receive an asset such as 50% of the property on the first death and have a potential Capitial Gain on the growth of an asset between the first and second death.
Or
They wait until the second death when there is no capital gains and double the nil rate band

My comparrison showed that where growth in asset value was stronger than the rise in the nil rate band, it could mean that the capital gains was less of a tax than the additional IHT due by waiting until the second death, especially considering the many ways to mitigate CGT.

If you were not considering CGT how on earth did you make your own assumptions?

localhero

Because this thread is about inheritance tax.

Everybody's situation is different and their Will must be written according to their circumstances. What I said is that making a gift on first death is not always efficient for IHT purposes. I also said that giving a life interest to the surviving spouse means that A + B who will own the asset upon 1st death but who won't receive the asset until second death will not pay CGT on it.

It is also often unwise for many other reasons to make a gift to A & B on first death and likewise to leave the entire estate to spouse.

I don't generalise or make assumptions, I stick to hard facts and work to the individual circumstances put before me.

DavidLaGuardia

peter999 wrote: »

This sums up the attitude of Brown & Labour's previous pathetic changes to Inheritance Tax, to keep raking the money in.
peter999

Hardly raking it in, do you think the burden should be put on income tax intead so those actually earning the money pay for it?

Micahael Portillo recently made a statement that IHT was a "Rational Tax" on the dead an that the claim of double taxation was vastly overstated (those who bought a house for £7,000 in 1970 and now exceed the threshold have had lots of tax free growth]. IHT once had support from not only socialists but also the meritocrats of the right, as a tax on something unearned or a windfall for those who had benefitted disproportionately from the society of wealth creation.

Whether you think it is a good or bad thing, the Conservative's proposals
for the £1m threshold that potentially makes estates up to £4 million exempt.

A couple could both use £1 m each and, in addtion, each make a chargeable lifetime transfer of assets they STILL derive an income stream from of up to £1 million each (only the excess of the nil rate band is taxed and after 7 years it is exempt from IHT). Have the Conservatives done their sums on this, or just looked at theone million pound estates??

peter999

localhero wrote: »

The legislation is (rather surprisingly) very clear and according to well placed sources was formulated for the 2006 budget (and not in a few days in response to the Tories as per popular belief) but Gordon Brown decided to keep it back for a pre-election announcement.

localhero wrote: »

It sounds rather like it.

This is a forum to help people to save money, not an arena for political diatribe.

Well, it was you saying Gordon Brown was just about to announce all this & nothing to do with the Tory proposals.

Load of balderdash I say.
He only had 10 years.

peter999

localhero

Peter ,

Let's get one thing straight, I am no fan of Gordon Brown and even if I was this is not the place to debate it.

The remark I made was in answering a query as to whether it would be advisable to make a will now or wait. The answer I gave was based on the clarity of the legislation and the likelihood that it would be modified in some way.

Your input is tiresome and unhelpful so please take your political views back to central office or wherever they came from.

DavidLaGuardia

localhero wrote: »

Everybody's situation is different and their Will must be written according to their circumstances. .

Here you have hit the nail squarely and correctly on the head.

What concerns me is that the advice that many "experts" are implying in the media is going to put people of considering a gift of the nil rate band on the first death automatically without a cosidering it relative to their own circumstances.

Also Tax efficiency is never considered in relation to one form of tax ignoring all others. One would never create a situation to save £50 on tax X that meant paying £100 on Tax Y.
Funnily enough though, if we are ONLY considering IHT then my example shows more IHT being paid by waiting until the second death as the growth on the asset over the growth in the nil rate band is clearly going to mean more IHT.

localhero

I tend to ignore the 'experts' in the media as they are usually nothing of the sort. There is no substitute for professional advice that meets the needs of the individual.

Anyone who is close to exhausting their IHT threholds will need to keep the situation under review and consider further tax planning.

It is difficult to second guess whether property worth £600k now will be worth more or less than £700K in 3 years time. Property growth in many areas of the country is stagnant so I wouldn't rush to conclude it would result in more IHT. As always a pragmatic view must be taken when viewing the pros and cons of any course of action.

Cardew

As someone who only rarely visits this area of the Forum, may I express my thanks to localhero, DaviLaGuardia, Tiggs and others for a most stimulating thread; with the potential to lead to some serious money saving!

searoad

Am I correct in thinking that the recent change by Gordon Brown to increase the IHT base limit, is not really an increase but just a recognition that many people have taken advantage of the nil tax provision on first death. Is £300,000 still the level for the first person dying for tenants in common.

Cardew

searoad wrote: »

Am I correct in thinking that the recent change by Gordon Brown to increase the IHT base limit, is not really an increase but just a recognition that many people have taken advantage of the nil tax provision on first death. Is £300,000 still the level for the first person dying for tenants in common.

Essentially yes!

The various implications and permutations have been painstakingly explained by some experts in the previous posts.

As I understand it, not a huge change for those who have taken advantage of the nil rate band; still £300k + £300k = £600k rising to £700k in 2010.

The big gainers are those who simply inherited everything from their spouse when he/she died.

I would suggest you read the thread.