The Chancellor unveiled his budget on 15th March but from the point of view of inheritance tax and estate planning there was no new announcements.
It had been announced in the 2022 Autumn Statement that the inheritance tax thresholds would remain at their current levels until April 2028 and so this gives some clarity as to the position over the next few years.
On that basis it is worth summarising some key points.
For a married couple or those in a civil partnership, they have inheritance tax allowances of up to £1,000,000 between them available on death. With this in mind, it would be important to ensure that your wills are up to date so as to maximise the use of these allowances. This is particularly the case where one member of the couple had a previous marriage or civil partnership that ended on death. If that is the case, there is the possibility of bringing in the deceased’s allowances too and so if this may be relevant to you, it would be important to take advice.
There are still steps that can be taken during someone’s lifetime to mitigate a potential inheritance tax liability. Gifts can be made during someone’s lifetime to take into account their annual inheritance tax exemption. Another exemption that tends to get overlooked is gifts out of surplus income, whereby, an individual can make a gift for inheritance tax purposes of any amount from their surplus income, but it is important to take advice on making this type of gift to ensure that it is recorded properly.
Various other lifetime exemptions are also available, including gifts in consideration of marriage or civil partnership, which again is an exemption which is often overlooked. You can make a gift to either or both parties to the marriage/civil partnership which is exempt from inheritance tax, with the actual amount that is exempt depending on your relationship to the couple.
Again, it would be sensible to take advice on this and it should be noted that these exemptions can all be combined with each other so that relatively significant tax savings can be made over the course of time if gifts are properly planned.
Colman Coyle has considerable experience in advising in relation to lifetime tax planning and the preparation of wills and related issues and if you would like to discuss the issues raised here, please contact Patrick Green on 0044 0207 354 3000 or Patrick.firstname.lastname@example.org.