New Inheritance Tax threshold for couples

Tiggs_2

Cardew wrote: »

Essentially yes!

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.

Spot on - politicaly very clever:

Tories say "we will change 300k into 1m" Labour say "we will add 300k to 300k and give you 600k"

Anyone that thinks adding to lumps of existing 300k is the same as changing the existing 300k into 1m needs to do my 3 year olds maths lessons - yet Labour are accused of stealing the Tories idea!

So Labour give nothing away yet "benefit" from people thinking they have copied the Conservatives!

peter999

Interesting that the Tories have exposed how popular IHT reform is with the public & now both Labour/Conservatives have no option but to take it seriously.

Treasury releases death tax dates
http://news.bbc.co.uk/1/hi/uk_politics/7084700.stm

The government has released a list of dates when it discussed changing the inheritance tax rules, amid claims the policy was "stolen" from the Tories.

peter999

valerie999

i understand that the spouses iht allowance will pass to the surviving spouse and it is backdated so a widow my allowance is 600,000. however i want to marry again do i lose the allowance back down to 300,000 and do i get it back if husband no. 2 dies?

localhero

Hi Valerie,

No, you won't lose the additional IHT allowance if you remarry.

Whether you survive your second husband or not, your estate will still benefit from an uplift of up to 100% of your nil rate band - ie £600,000 under the current rules.

Willman_Rodders

Just thought for those of you who have been following the recent proposed changes to the IHT legislation that you might be interested to know that the Inland Revenue have now issued a revised form IHT216. This is the form that a surviving spouse needs to complete when they wish to claim their former, deceased, spouse's unused IHT allowance.
You can read the document here ....

http://www.hmrc.gov.uk/cto/iht/whatsnew.htm

Other recent HMRC announcements can also be seen here.

Page 1 of the IHT216 document shows what documents will be required to be able to succesfully claim your former spouse's unused IHT allowance; they also list the information you will need to be able to complete the form in its entirity.

hardpressed

My

Tiggs wrote: »

very simple - how much of his nil band did your dad NOT use - answer = 100%

so when your mum goes she can up HER nil band by 100%. In 07/08 that means £600k, next year £624 then £650 then £700 if she makes it to 2010.

The fact she gave you land is not relevant (as long as it was a gift proper and she retained no use of it)

My situation is very similar. I have taken out life insurance to cover IHT so would I be safe in cancelling it now? When do the new rules come into force?

jamesd

DavidLaGuardia, from the responses you've received it appears that the inheritance tax and will specialists here are missing or ignoring the big picture, to the likely detriment of their client's interests.

Lets assume generously that inheritance tax thresholds rise at twice the inflation target, 6% a year. And that investing the money delivers the average long term UK equity returns, 12% a year.

Ten years later a 300,000 gift is worth 931,750. The 300,000 nil rate allowance has risen to 537,250.

The advice to delay the giving has brought 394,500 more into the inheritance tax band when it could have been shielded by giving it earlier.

The inheritance tax specialist can accurately point out that the early giver has lost 237,250 of nil rate band that would have been available by waiting (537,250-300,000) but that's likely to be of little consolation to the recipients who are facing the larger tax bill.

localhero

A decent willwriter when taking instructions will advise on the legal position and the practicalities of various courses of action.

The client should be told what the thresholds currently are and the fact they will rise to £350,000 in 2010.

By making first death gifts the client's family might be worse off and they might not.

If the client believes his family can outperform the rises in the IHT threshold taking into account fees and taxes, then he may prefer to make 1st death gifts.

Of course every client's situation will differ, they will have different types of asset and for the vast majority it will be their family home. We all know that the value of property generally outperforms inflation & the IHT allowances, but there are many other considerations that need to be met by the client.

The most important will be whether they want their spouse to be deprived or not of the asset. Ultimately it is the client's task to decide whether to make a first death gift or not.

Nobody has a crystal ball, for a return of 12% is not guaranteed, neither is the fact they will live another 10 years - so it's certainly not the willwriter's job to advise what the client should do. To do so would be foolhardy and potentially negligent.

As I've said the matter is not clear cut and the client must weigh up the pros and cons of every course of action and ultimately make an informed decision based on their circumstances.

jamesd

localhero, yes, control is perhaps the first and most important consideration.

As you've noted property is likely to outperform IHT rises, so for the typical property splitting case it seems likely that not delaying the giving is likely to produce the better result.

For other investment types, it's likely that the recipients would be investing at higher risk/return than the giver, assuming a typical retired cautious or medium risk split, so increasing the advantage of giving early.

The year or perhaps two just before a significant increase in inheritance tax threshold is more interesting. A 16.7% increase in threshold in 2010 might well make delaying a good idea in 2009. Perhaps even 2008 depending on the investment returns that are expected. Such are the joys of lumpy changes to the thresholds.

roddydogs

What life insurance is this that covers IHT?