Our Housing team are delighted following a formal tender procurement process to have been appointed to three lots under the new multi-million-pound legal services framework for The Riverside Group.
In regards to mitigating inheritance tax in particular, the Inheritance Tax Act 1984 contains some really clear (and straightforward) tax planning opportunities and tax exemptions. Making full use of these allowances and reliefs should be the foundation of any tax planning for clients – so here’s a quick reminder of some of the easiest ways to mitigate an inheritance tax bill for you and your clients.
Potentially exempt transfers
An outright gift to any individual of any amount can be made and, provided you survive for at least seven years, that gift will fall outside of the value of your Estate for inheritance tax purposes. A gift also crystalises the value of the gift at the date it is made – so growth on the asset or investment is removed from your estate.
However, if you die within seven years of making the gift, the value of the gift will be part of your Estate for inheritance tax purposes - although the gift will not have to be repaid from the recipient. Depending on the value of the gift, however, they may have to pay some of the tax due if your estate is liable to inheritance tax.
There are some traps to be mindful of in relation to lifetime giving, so it is sensible to take advice if you are contemplating making significant gifts that will exceed your available nil rate band to ensure you don’t inadvertently ‘trip up’ over one of these pit falls.
Each person can give away £3,000 each tax year under the annual exemption rules without using any of their nil rate band. The £3,000 allowance can be made available to one person or can be split between a few people e.g. £1,500.00 to two people.
It cannot, however, be used in conjunction with the small gifts exemption outlined below.
This is a ‘once a tax year’ exemption and you may wish to consider utilising this exemption on a regular basis if you are not already doing so. In the event that you have not previously made gifts along these lines, for tax year 2016/17, you could, in fact, give away £6,000.00 under this exemption, rolling forward the unused exemption for tax year 2015/16.
Small gifts exemption
You can make as many gifts, to as many people, of £250 as you see fit without those gifts eating into your available nil rate band.
This means that you could make annual gifts of £250 to each of your grandchildren, nieces, nephews, etc. should you wish to do so. You cannot, however, give someone £250 who has also been the recipient of all or some part of the £3,000 annual exemption mentioned above without using part of your available nil rate band.
Normal expenditure out of income
If your income is more than sufficient to meet your present needs, any excess income (i.e. that which would otherwise add to your savings and increase your available capital wealth), can be gifted to a person or people in such shares or proportions as you see fit.
This is a valuable exemption, particularly if your income far exceeds your needs. However, it is important that you do not reduce your standard of living to increase your available disposable income.
For this to be claimed, detailed records about your income and daily expenditure on bills, socialising and even food shopping have to be completed, so if you start using this exemption, keeping detailed records could be really helpful for your Executors to ensure they can claim this exemption.
If you have a dependant relative you wish to make provision for to ensure their ‘reasonable care or maintenance’, there is a valuable exemption for such provision to be made. There is no definition of what is ‘reasonable’, and each case will, therefore, fall to be determined on its own merits. This exemption allows potentially significant sums to be gifted by a Donor without them needing to survive for seven years or otherwise impact their own inheritance tax position.
This is an often overlooked exemption, so for families where there is a dependant relative, exploring the use of this exemption could be beneficial.
Ensuring that you and your clients make the most of, and build a tax-efficient plan, with some of these standard exemptions as a basic platform could make a material difference to your taxable estate in due course. This article contains just a few reminders of some of the often overlooked ‘basic’ of tax planning, but there are lots of other planning opportunities, investments and protections that can be explored as well.
It is, however, always important that you do not let inheritance tax planning and mitigation strategies unduly affect your day to day life.
For more information on tax planning and tax effective gifting, please contact Donna Holmes.
Necrotising Fasciitis, more commonly known as the ‘flesh-eating disease’, is a significant medical condition that requires urgent treatment.
Many of us who have been following the unfolding Inquest, are not surprised that the Coroner found gross and significant failures on the part of those caring for him.
Transferring out of SHPS will not be suitable for every housing association. So what should housing associations do?
In all the action to remove defective cladding, leaseholders have been the elephant in the room. Whilst social landlords might have adopted a wait and see approach private landlords do not have that luxury.
We welcome the Labour Party’s commitment to doubling the size of the co-operative economy. We wholeheartedly support the ambition to grow this vitally important part of the economy.
It was first referred to in the Charities Act 2006 (which was subsequently replaced by the Charities Act 2011) but it has finally been announced that charitable companies are able to convert to a charitable incorporated organisation (“CIO”).
The Private Members Bill Homes (Fitness for Human Habitation and Liability for Housing Standards) Bill 2017-19 now has Government support and was debated at second reading on Friday 19 January 2018.
In short - yes. This is a common question in personal injury or clinical negligence claims and has recently come before the High Court in judicial review proceedings.
GDPR The General Data Protection Regulations (GDPR) will come into force on 25 May 2018 and bring changes to the rules governing data protection and the requirements placed on organisations which control or process personal data.
To receive invitations to our events, as well as information and articles on legal issues and sector developments that are of interest to you, please sign up to Newsroom.