The subject of inheritance tax (IHT) is usually met with a groan, as people contemplate the percentage of their estate that will go to HMRC following their death.
Inheritance tax refers to the tax on the property, money and possessions of someone who has died.
It isn’t payable by everyone as there is a threshold of £325,000.
After £325,000, there is also no inheritance tax payable if the value is paid to a spouse, civil partner, charity or a community amateur sports club.
The inheritance tax rate is 40% on anything above the threshold.
What could change?
The government is proposing an IHT relief for transfers between siblings which would be similar to spousal relief.
Under the new rules siblings could be exempt from paying IHT on property left to each other, but they must have lived together for a minimum of seven years and the surviving sibling must be more than 30 years old.
Half brothers and sisters would also qualify for the exemption.
The proposed new rules are welcomed by most but haven’t yet been confirmed
What’s the background?
The need for change has been highlighted by an interesting case relating to two sisters in London.
Catherine and Virginia Utley had lived together for more than 30 years in a house they both bought.
They argued that they should be treated the same as spouses, as otherwise, when one sister died the other would be forced to sell the home to pay a large IHT bill.
Due to the current rules, the sisters lost their case.
The siblings IHT bill is still under consideration, but should it be passed, it will be a positive change.
However, it does then ask the question of whether a similar relief should be available for unmarried couples, for example, those who have been together for more than seven years but at the moment would potentially be liable to inheritance tax should either die. This can be catastrophic if it means the sale of a family home to pay IHT, for example.
If you have any questions about IHT rules or would like advice in this area, please contact us info@beatons.co.uk or call 01473 659777.