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Following a review by the Office of Tax Simplification the rules around inheritance tax may be set to change after proposals were submitted to the Treasury at the end of last week.

 

The major shake-up is the scrapping of the “7 year rule” replacing it with a 5 year un-tapered rule in relation to tax payable on gifts made before death.

 

Under the current rules inheritance tax is payable on any assets or gifts made within 7 years before someone passes away, if they die after 7 years then no tax is payable. The amount of tax due is tapered. For example – if someone dies less than 3 years after making the gift, they are liable for the full 40% inheritance tax. This gradually decreases to 8% if they survived 6-7 years after the gift was made.

 

The proposal is to reduce this to 5 years to make the paperwork and administration less complicated.

 

On one hand this change means people will be able to make gifts without the worry of surviving a further 7 years, however the un-tapered rule may mean that some end up paying more tax than they would have been liable for under the current rules. The removal of the taper relief means that 1 day could make a difference between paying 40% or nothing at all.

 

Although the tax is only payable for roughly 5% of deaths in the UK, calculations still need to be made and this adds pressure on executors who are already grieving the loss of a loved one.

If you are concerned about inheritance tax changes or want further guidance or how best to plan for your later years and the passing on of wealth / assets then please speak to our specialist Estate Planning team today on 01256 844888 or email enquiries@lambbrooks.com.

 

Our knowledgeable team will be able to advise you of your options and prepare a tailored solution that best fits your own succession plan for your family.

 

 

The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice.  The law may have changed since this article was published.   Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances.