When it comes to Wills and Estate Planning, many people are concerned about Inheritance Tax. Not only regarding the amount that might need to be paid on their estate, but also the complexity of the process in general.
Proposals for a revamp of the Inheritance Tax system has suggested that the rules regarding Tax on gifts to family and friends should be simplified, and that less should have to be paid. If such proposals were permitted, these changes could have a significant effect on those making financial plans for the future.
Currently, when someone passes away within seven years of gifting money or possessions, up to 40% tax must be paid – whereas the Office of Tax Simplification (OTS) has proposed this period should be changed to five years.
The amount of tax payable, usually by the recipient, will depend on the length of time between the date the gift was given and the date of death.
The rules on gift-giving, however, are more complex and often not fully understood. For example, one of the allowances currently available allows a person to gift £3,000 per tax year without it being included in the total value of the estate. Tax is not required to be paid on an estate that is worth less than £325,000 in total.
Statistically, less than approximately 25,000 estates each year are required to pay tax. However, a significantly higher amount of estates are made to feel concerned and go through the burden of having to complete and file the relevant paperwork to assess whether or not they are tax liable.
Whilst there appear to be obvious benefits to the proposals, those reviewing the plans have suggested that in practice it could leave some beneficiaries of such gifts with a higher amount of tax to pay than there would be under the current rules.
As such, careful deliberation will need to be given to the OTS’ suggestions regarding the Inheritance Tax proposal before any of them are approved and implemented.
WHAT TO DO NEXT
If you have any enquiries regarding a Will, this Inheritance Tax proposal, or making plans for your estate, get in touch today for a free initial consultation in complete confidence. Choose one of the methods on the right-hand side of this page, or call us on 0113 200 9720 to find out how we can help you.
– Article by Natasha Golding
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