The inheritance tax (IHT) exemption for ‘normal expenditure out of income’ is extremely generous. There is no fixed upper monetary limit; a transfer of value (e.g. a cash gift) is exempt to the extent that it satisfies the exemption conditions. Furthermore, a gift that satisfies the conditions is immediately free of IHT. This is a… Read More »
Owners of investment properties might sometimes like to gift an interest in a property (e.g., to adult children) but retain all the rental income. Their intention is generally to reduce the value of their estates for inheritance tax (IHT) purposes without affecting their standard of living. Do you have a reservation? The ’gifts with reservation’… Read More »
The family home is the most valuable asset in the death estates of many individuals and could trap some homeowners in the inheritance tax (IHT) net. Thankfully, a claim for the residence nil rate band (RNRB) is potentially available where the family home is ‘closely inherited’ (IHTA 1984, ss 8D-8M). The RNRB (£175,000 for 2022/23)… Read More »
Business property relief (BPR) offers relief from inheritance tax (IHT) of 100% (or 50%) on a transfer of value which is attributable to ‘relevant business property’. Unfortunately, not all unquoted company shares qualify for BPR. Certain company activities make the shares ineligible for relief, such as dealing in stocks or shares, land or buildings, or… Read More »
Inheritance tax (IHT) business property relief (BPR) is available to business owners if certain conditions are satisfied. BPR (at the 100% rate) applies to ‘relevant business property’ including a business or interest in a business. Unfortunately, not every business potentially attracts BPR, such as where the business consists wholly or mainly of ‘making or holding… Read More »
The inheritance tax (IHT) allowance (or ‘nil rate band’) (£325,000 for 2022/23) is generally available to individuals. For married couples (and civil partnerships), the transferable nil rate band (TNRB) rules broadly allow claims for unused nil rate band of a deceased spouse (or civil partner) to be transferred to the survivor. The survivor’s nil rate… Read More »
A parent with sufficient means may sometimes wish to transfer an income producing asset. For example, mother may wish to transfer investment property in London into a discretionary trust for her daughter (e.g., to help cover university costs or supplement income when buying her own home and/or starting a family). However, there are various tax… Read More »
A family investment company (FIC) is a possible means of passing family wealth down to adult children and remoter generations. Furthermore, a FIC can be a tax-efficient ‘wrapper’ for individuals to manage their wealth. A FIC is simply a company; its shareholders are family members. For example, parents could apply their wealth for the benefit… Read More »
The inheritance tax (IHT) ‘gifts with reservation’ (GWR) provisions are anti-avoidance rules. They are basically designed to prevent ‘cake and eat it’ situations (i.e., giving away an asset in the hope of surviving at least seven years in order for the gift to become exempt from IHT, but continuing to use or enjoy the asset… Read More »
It is said that inheritance tax (IHT) is the UK’s most hated tax. Nevertheless, the transferable nil rate band (TNRB) is a welcome facility for married couples or civil partners (nb references to spouses in this article include civil partners). The TNRB provisions (IHTA 1984, ss 8A-8C) broadly allow claims for all or part of… Read More »