Back in December 2013 I wrote a blog about HM Revenue & Customs (HMRC) closing an inheritance tax planning ‘loophole’ and this is an update on the latest proposals.
HRMC want to shut down the use of multiple trust arrangements to avoid inheritance tax and have been consulting on this.
The consultation period is due to end on 29th August this year.
Currently you can set up any number of trusts and each trust would be subject to its own nil rate band.
This means that by having multiple trusts instead of one trust, you can effectively reduce any tax charges on the initial transfer, as well as periodic and exit charges.
The latest proposal is a separate allowance, a settlement nil rate band, which would be the amount that each person could transfer into trusts over their lifetime.
The limit is likely to be the same as the nil rate band, meaning that a couple could place £650,000 into trusts over their lifetime which would be tax free.
Trusts are likely to remain a part of Inheritance Tax planning, especially when combined with financial products such as discounted gifts and loan trusts.
However, the amounts that can be passed on efficiently in this manner could be significantly reduced.
Do speak to us if you have any questions about inheritance tax planning, a tax which is often described as ‘voluntary’.
When working with clients to help reduce future inheritance tax bills, we find there is usually a trade off between effectiveness and control.
Understand this trade off and determining how much control over their assets a client is willing to surrender is an important part of the inheritance tax planning process.
Do get in touch by calling me on 01483 274566, emailing shelley@icl-ifa.co.uk or following me on Twitter @informedshelley to find out more.
