New Inheritance Tax threshold for couples

Tiggs_2

john - if your wife used NONE of her nil band when she died (i.e. - it all came to you) then you can double up your nil band when YOU die.

so, drop dead in the morning and you have a £600k allowance. Good news for you!

(if she did use some of her allowance - maybe a gift to the kids in her Will? Then the amount of the nil band you can re-use is proportional to the amount she didnt use....as i covered above.)

SJ1

This will make no difference to people who are married who have actually looked into their tax affairs as a married wife or husband can give anything to their spouse on death without incurring inheritance tax - gifts to a surviving spouse are tax free.

People are therefore usually advised, if they have a large estate, to use their £300k tax free band to gift to their children or relatives without them incurring tax, with the remainder to their surviving spouse who incurs no tax on this. Therefore when the other partner dies they will have an additional £300k that they can give to children etc, tax free on their death. This is known as maximising your allowances and is easy peasy so long as you know the rules but not if you don't. If for example a wife died and gave her whole estate to her husband it would be free of inheritance tax and she would waste her nil rate band - meaning her children would pay an additional 40% of £300,000. This change will stop that but overall has changed little, it has simply made it easier for people who traditionally don't employ people to organise these things for them!

On good thing is that, from what I have heard, this is backdated for all widowers and so will apply to anyone who was married who has lost their partner already. This could get interesting in terms of proof and what happens if you have remarried - do you get £900,000!? I doubt it somehow!

Overall, as usual, great headline but this will mean little for people already rich enough to look into these things.

SJ

PasturesNew

Rikki wrote: »

:mad: Great so I'd still get clobbered.

Doesn't matter... you'll be dead!

Tiggs_2

SJ1 wrote: »

This will make no difference to people who are married who have actually looked into their tax affairs as a married wife or husband can give anything to their spouse on death without incurring inheritance tax - gifts to a surviving spouse are tax free.

People are therefore usually advised, if they have a large estate, to use their £300k tax free band to gift to their children or relatives without them incurring tax, with the remainder to their surviving spouse who incurs no tax on this. Therefore when the other partner dies they will have an additional £300k that they can give to children etc, tax free on their death. This is known as maximising your allowances and is easy peasy so long as you know the rules but not if you don't. If for example a wife died and gave her whole estate to her husband it would be free of inheritance tax and she would waste her nil rate band - meaning her children would pay an additional 40% of £300,000. This change will stop that but overall has changed little, it has simply made it easier for people who traditionally don't employ people to organise these things for them!

On good thing is that, from what I have heard, this is backdated for all widowers and so will apply to anyone who was married who has lost their partner already. This could get interesting in terms of proof and what happens if you have remarried - do you get £900,000!? I doubt it somehow!

Overall, as usual, great headline but this will mean little for people already rich enough to look into these things.

SJ

but is now VERY important that those people change their Wills as maximising allowances is now INEFFECENT! You are better of giving your spouse 100% of the FUTURE allowance when they die, a LARGER amount!

and the amount is limited to two nil rate bands to allow for re-married people, etc (its all in the HMRC notes)

KDH_2

The backdating element of all this may be at the nil rate threshold in effect at the time of the first death ...................ie if you lost your spouse in eg 1979 the nil rate amount may be relatively small ...............ie it will be £300K + this small amount at the time of the second death.

With this Government the devil is in the very small print...........

RayWolfe

........ who'd be a politician? Some people will never be satisfied whatever happens!

john1950

Tiggs wrote: »

john - if your wife used NONE of her nil band when she died (i.e. - it all came to you) then you can double up your nil band when YOU die.

so, drop dead in the morning and you have a £600k allowance. Good news for you!

(if she did use some of her allowance - maybe a gift to the kids in her Will? Then the amount of the nil band you can re-use is proportional to the amount she didnt use....as i covered above.)

It is good news, but really it is good news for my children. The eldest has her own house but the other two will just never manage on their own to purchase a property. So if this does apply to people like myself then there is some comfort that they will benefit from any savings I may accummulate in addition to the house.

I failed to do the retrospective will thing after my wife died so none of her allowance was used. This is an opportunity to correct that error so that is why I find this so important.

What is your source please.

Tiggs_2

KDH wrote: »

The backdating element of all this may be at the nil rate threshold in effect at the time of the first death ...................ie if you lost your spouse in eg 1979 the nil rate amount may be relatively small ...............ie it will be £300K + this small amount at the time of the second death.

With this Government the devil is in the very small print...........

no its not - its as i described already - the amount of nil band a survivor can use is the nil band at the time of the SECOND death X the % that was not used at the time of FIRST death.

hence why EVERYONE should leave their spouse all their assets and 100% of the nil band so the spouse can double up in the future.

jem16

sloughflint wrote: »

But what if it all changes again in the future?

That's always the unknown bit.

At least the DWT route doubles the allowance anyway?

I suppose it depends on the length of time between the two deaths and how much the allowance has increased.

For example each person has £300k, total £600k.

Using the trust now and leave £300k to the children on first death instead of the spouse so 100% used. In 2010 the allowance goes to £350k each. The 2nd person dies and can pass on £350k to the children. So in total £650k was free of IHT.

However if on the first death everything was passed to the spouse, on the 2nd death the allowance would be £350k x 2 as none of the allowance was used on 1st death. So in total £700k is free of IHT.

So even in the space of less than 2 years £50k has been saved from inheritance tax.

Tiggs_2

jem - spot on.

and if the 300k to kids is important give it as a gift AFTER 1st death and hope the survivor makes 7 years.

i WOULDNT do a DWT now.