The government recently published a tax reporting consultation to reduce the reporting requirements for estates where inheritance tax is not payable from January 2022.
Whilst this is desirable from and administrative perspective, is it practical when it is becoming increasingly important to keep records of accounts to ensure the availability of transferable nil rate bands (NRB) and residence nil rate bands (RNRB) between spouses?
Each individual currently has £325,000 available to leave free of inheritance tax on their death (the NRB). There is also the RNRB which allows an individual to leave their residence (up to the value of £175,000) to their direct descendants free of inheritance tax.
Both the NRB and RNRB are transferable between spouses which means that if the first spouse dies and their estate does not use either allowance, on the second death there is potentially £1,000,000 available to leave free of tax (provided the conditions of the RNRB are met).
Lifetime gifting within seven years of death effects the availability of the NRB on death. If gifts are made in excess of the NRB this can mean inheritance tax is payable by the recipient of that gift on the death of the donor. This can be a complex issue but with careful planning and Will drafting your wishes can be recorded in a clear and concise way.
When administering an estate the executors are required calculate any inheritance tax due and to report gifts made by the deceased in the last seven years to HM Revenue & Customs. Gifts between spouses or gifts under the inheritance tax threshold in an estate where there is no inheritance to pay would mean that a formal return may not be required. Although inheritance tax is not payable here, gifts made in the seven years prior may be chargeable to inheritance tax and would alter any available transferable NRB available. This, amongst other reasons, is why it is so important to keep financial records during your lifetime.
If you are planning on making lifetime gifts or are an executor administering estate and would like some advice please contact Debbie Gale, Lisa Whelan or Sarah Pitman in our probate team.
Contributor: Sarah Pitman
Stamp Duty Land Tax - new surcharge for non-UK residentsRead more
Lasting powers of attorneyRead more
Financial advisors Top family law tips to help your clientsRead more
Bank of Mum and Dad - beware lack of documentationRead more
Parental alienation: treading a treacherous pathRead more
Does the legal definition of a “mother” suit modern society?Read more
Proposed increase to probate feesRead more
Tax changes from the Finance Bill 2019Read more
Wife must remain married, rules Supreme CourtRead more
Helping you navigate your business through the risks and opportunities that Brexit will bring.Read more
The way people shop is constantly evolving, from the growth of online and the changing use of stores...Read more
The widespread disruption and closure of businesses caused by the Covid-19 pandemic and the subsequent national and local lockdowns has brought into sharp focus the question of available insurance cover for losses under...Read more
Watch our video series for information on the legal issues that are affecting the real estate sector. Each...Read more
The pandemic has had a deep and long-lasting effect on the leisure, food & drink sector, forcing operators to embrace new ways of attracting and servicing customers.Read more
The pandemic has forced the majority of the workforce into a world of remote working. As a result, our cities are evolving.Read more
Our countdown to Brexit and beyond podcast series looks at the impact for businesses on both sides of the pond of any free trade agreement between the UK and Europe and the UK and the US. ThisRead more
There's a growing demand for retailers to do more to attract the Purple Pound – the collective spending power of disabled shoppers, estimated to be worth around £274bn. We look at the opportunities, the legal issues and...Read more
Green finance is gaining speed, driven by global climate change pressures and the recognition of the vital role which sustainability plays in a resilient financial services sector.Read more
Our experts in private client, personal tax, trusts and probate provide tailored, practical and affordable solutions that support you at every stage in life.Read more
Dealing with the practicalities of a bereavement can be time consuming and cause additional stress at a difficult time. Our experienced and dedicated probate team provide the guidance and support you need to make the process as straightforward as possible.Read more