Inheritance Tax is payable on the part of an estate which exceeds the nil-rate band (a person’s tax free allowance) this rate was not changed in the June budget and remains at £325,000.
However, the Capital Gains Tax (CGT) increase announced will mean that individuals, trustees and personal representatives, administering the estates of the deceased, could feel the brunt of the rise as gains made will be at risk of exposure to the new higher rate.
The rate of Capital Gains Tax will remain at 18 per cent for the basic rate taxpayer but will increase to the rate of 28 per cent if you are a higher rate taxpayer and this could have implications for charges on any gains made while the estate is being administered. Further, Trustees will have to pay 28 per cent on any gains for the duration of a trust. Families will often look to create a protective tax regime for their children in the event that they will be orphaned by leaving assets in trust until the children are old enough to manage the assets without the guiding hand of their parents. However, there is a real danger of trust assets being eroded through a combination of income tax at 50 per cent, CGT at 28 per cent and the impact of the changes to the inheritance regime introduced in 2006.
Personal representatives, trustees and individuals at risk of increased taxation should urgently seek advice from their solicitor to ensure that their financial arrangements are structured as tax efficiently as possible in the light of these new developments. Jayne Kesbey, Solicitor said “It is vital that couples equalise their assets, make full use of their personal allowances and annual exemptions and consider making gifts during their lifetime in order to reduce tax liabilities in the future.”
For more information about any aspect of Personal Estate Planning please telephone (01279) 758080.
Pellys LLP
