Changes to Simplify Inheritance Tax
Purely Probate welcome the proposed changes to simplify Inheritance Tax(IHT) Gifting Rules
Recommendations have been made by the Office of Tax Simplification (OTS) to simplify the rules on lifetime gifting. Currently, individuals can gift up to £3,000per year without this being included in their estate on death. There are other allowances, including wedding gifts to some family members and small value gifts. Any gifts above£3,000within the 7 years of death (which don’t qualify for an exemption)could still be included as part of the estate when IHT is calculated.
The proposed changes would see individuals receiving one personal gift allowance, replacing the rather complicated and long list of exemptions currently in force. The OTS has suggested that this personal gift allowance be calculated in line with inflation. This is a welcomed proposal since the £3,000 annual exemption limit has remained unchanged for years. Had this exemption already been subject to an increase in inflation, this annual gift exemption would already have increased to around £11,900.
The OTS has also suggested that the ‘7-year rule’ for gifting be reduced to 5 years and that the-complex tapering relief available to some gifts made in the 3-7 years before death are abolished completely.
Whether or not these proposals are ever taken up by the government, it will continue to be important to make a record of any gifts you make during your lifetime(whether these are gifts of cash, property or specific items of value). Executors often struggle to provide the required information to the Inland Revenue on gifts made before death, and having the information recorded in advance is invaluable.
If you are concerned about the potential consequences of making gifts to friends or family during your lifetime or if are wondering whether it would be better to make provision in your Will, please do not hesitate to contact us. We would be happy to talk to you about the options available.
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