Research suggests 70% of individuals ‘unaware of inheritance tax nil-rate band’

Research carried out by Canada Life has suggested that a significant amount of individuals ‘do not know the threshold’ for the standard inheritance tax (IHT) nil-rate band.

Canada Life found that 70% of those surveyed did not know the standard nil-rate band threshold, which currently sits at £325,000.

55% of those questioned do not know the rate at which assets above their available nil-rate band are taxed, the data also revealed.

Meanwhile, an additional 38% do not believe that their main home is liable for IHT.

Canada Life has warned that many families in the UK could face ‘unexpectedly high’ tax bills as a result.

‘There is a disturbing lack of knowledge which will undoubtedly translate into unnecessarily high inheritance tax bills,’ said Karen Stacey, Head of Distribution Services at Canada Life.

‘Unless people learn more about taxes and actively plan the future of their estate, the government is in line for a large, ongoing and often unnecessary windfall.’

We can help you to plan to minimise the IHT due on your estate – please contact us for further advice.

Chancellor commissions OTS to review inheritance tax rules

Chancellor Philip Hammond has commissioned the Office of Tax Simplification (OTS) to review the UK’s inheritance tax (IHT) regime, and outline ways in which the tax can be simplified.

In a letter to Angela Knight, Chair of the OTS, and its Tax Director, Paul Morton, the Chancellor acknowledged that the existing IHT regime is ‘particularly complex’.

He stated: ‘I would be most interested to hear any proposals you may have for simplification, to ensure that the system is fit for purpose and makes the experience of those who interact with it as smooth as possible.’

Mr Hammond suggested that the OTS’s review should focus on technical and administrative issues surrounding the tax, alongside practical issues related to estate planning and disclosure.

The review should also examine how existing gifts rules interact with the IHT system, and look at whether the current rules cause taxpayers to rethink their decisions in regard to transfers and investments, said the Chancellor in his letter.

IHT is currently charged at 40% on the proportion of an individual’s estate exceeding the ‘nil-rate band’ of £325,000. The residence nil-rate band (RNRB) also applies in addition to the nil-rate band, meaning that a family home can be passed wholly or partially tax-free on death to direct descendants, such as a child, grandchild, step-child, adopted child or fostered child.

A scoping document for the review into IHT will be published ‘in due course’, the OTS said.

A Digital Death

The internet has grown fast over the past two decades – nearly as fast as those pesky Pokémon pop up – and unsurprisingly the law has struggled to keep pace with all the challenges this creates.

In the pre-internet age, it was easy for people to leave their collection of progressive rock albums to their nearest and dearest – those vinyl discs had a physical presence and could be listed in wills under personal possessions. But now – well, it’s complicated.

Remember back in 2012 the stories reporting that Bruce Willis was preparing to sue Apple over the right to leave his iTunes collection to his daughters? Okay that turned out to be untrue but it does highlight the problem. Buying electronic media doesn’t give you the same rights as buying tangible assets – most digital providers are only selling you a lifetime licence to use those files. And when your lifetime comes to an end, that’s that.

Of course one way round the problem is simply to give those close to you the log-ins and passwords to your social media accounts. And the terms and conditions set out by some digital companies allow a film library or play list to be accessed by several separate devices through the same password. Or you can talk to your will writing professional about listing those passwords in your will with instructions on who to give them to. There are also companies like www.passwordbox.com that will store passwords in a ‘Legacy Locker’ for a nominated ‘digital heir’ should the worst happen.

Facebook responded to the confusion by, a couple of years ago, launching a service that memorialises the account of a deceased person so, if a family member alerts the company to someone’s passing the account will be locked and the strap-line ‘Remembering’ added to the person’s profile. Also, if you nominate a ‘Legacy Contact’ with Facebook that person will have access to your account and be able to download all your pictures and posts should you die.

But as far as Pokémon goes its bad news – the service agreement that you signed when downloading the game granted you a ‘limited non-exclusive, non-transferable, non-sub-licensable license’ meaning that you can’t pass your captures on to anyone. So, sadly, when you go to the grave, your Pokémon go with you.

Increase in Probate Fees

With all the news surrounding Brexit you may have not read that the government is proposing a new tiered system of probate fees in England and Wales, based on the value of the deceased’s estate, rather than the current flat fee of £215.

Presently an application fee of £215 is made payable to HM Courts and Tribunals Service on all estates over £5,000.

Under new rules proposed by the government, the system of probate fees would change, to one based on the value of the deceased’s estate. In Scotland, the equivalent Confirmation process continues with a flat rate fee for eligible estates (currently £225).

Estates worth more than £50,000 will face probate fees which rise as the value of the estate increases.

I/We believe this is an unfair form of tax for ordinary families. With the increase in house prices many estates will now be subject to the proposed increase in fees. The death of a loved one can be an expensive process as it is, with funeral costs to pay upfront prior to the estate being distributed. For families to have to pay this additional fee adds to their burden, both emotionally and financially. I/we would call for the Government to rethink these proposed probate fee increases.

To find out more about the increase in probate fees, and what inheritance tax your beneficiaries may be liable for, please contact us.

When all around are losing their heads…

Whether you were for “out” or for “in”, the vote for Brexit has certainly stirred up a torrent of uncertainty in the world. Not only has Britain become divided and Europe shocked, even the South Korean Government and their stock exchange held emergency discussions on how to respond to our decision to leave the European Union!

Right now everything seems uncertain and so with stock markets falling, the political class in turmoil and unable to help and significant changes occurring what certainties can we hold on to?

Well its unlikely to surprise you that as will writers and estate planners we are going to say that the only certainty is life is sadly death, however that is the reality we all face.

Whether the markets are up or down or whoever is the Prime Minister there is no excuse for not properly considering what should happen when you die and leaving your relatives unable to know your wishes or potentially not receiving what you might want them to receive.

Whilst you might be putting off buying a new car or changing jobs don’t put off making a will. Life is short and the consequences of not addressing this can range from making things difficult for your relatives right the way through to the wrong people inheriting your estate.

Please contact us if you would like to talk through your options and we can help you create some certainty in a changing world.