01242 801748
The only certainty is uncertainty.
With Labour leading in the polls and a general election around the corner on 4th July 2024, landowners are unclear what changes in inheritance tax policy a change in government could bring.
The Shadow Chancellor pledged several years ago that Labour would consider every tax relief when in power; more recently Labour have confirmed they would not scrap Property Relief. Whilst this may sound positive, diligent landowners are paying little attention to these pledges and have decided to accelerate the execution of their succession plans.
Inheritance tax (IHT) is presently 40% on the value of an estate above a tax-free exemption of £325,000. There are various reliefs such as spousal exemptions and up to 100% relief for business and agricultural property. The purpose of this was to prevent agricultural businesses being split up on the death of an owner. With the public purse running low, IHT has the potential to be a large income generator for a new government which may be too tempting to not utilise.
Giving away assets during the owner’s lifetime is an efficient way of reducing IHT liability, particularly if the donor lives beyond 7 years where the IHT tax liability is tapered to Nil.
However, where the donor continues to receive a benefit from the property this may not be the best approach. This is called a gift with reservation of benefit which may also trigger income tax liabilities under the Pre-Owned Asset Tax rules. These rules apply if the donor continues to use the gifted property without paying the market rent. On death, the Property is also still viewed as the donor’s estate and will be charged to IHT.
For those landed estates open to meeting the necessary conditions including looking after the asset and opening it to the public, a conditional exemption tax incentive scheme provides a special tax relief.
Please get in touch to discuss how this may affect you or if you wish to discuss succession planning in general.
Frank Smith & Co 01242 801748 www.franksmithandco.com
