Written by Merlin Lewis
In this briefing, we explore the “Stealth Tax” increases due to affect both Inheritance Tax (IHT) and Capital Gains Tax (CGT).
By now you will have picked up key points from the Statement which will have a bearing on your everyday and future finances.
We must be thankful that the Chancellor has not removed or reduced any IHT exemptions or reliefs. Business Property and Agricultural Property Reliefs remain untouched. The period to survive a Potentially Exempt Transfer (PET) has not been extended from 7 years to 10 years.
The hidden whammy though, is that the IHT nil rate bands have now been frozen for another five and a half years until April 2028. As property prices rise and inflation gets a grip all round, many more estates and inheriting families will be paying IHT where either there would have been far less or no IHT payable before. For every £100,000 that a property goes up in value there will be a further £40,000 IHT to pay.
Taking action now could help reduce your tax burden
Our advice is to plan now and to make any gifting or restructuring of your assets a priority rather than kicking the can down the road for a few more years. The can will become increasingly difficult to kick.
The nasty on the horizon is the cutting of the CGT annual allowance from the current £12,300 per individual to £6,000 from 6 April 2023 and to £3,000 from 6 April 2024. There will be a similar cutting of allowances for trustees.
As for IHT, our advice for CGT is to take early action if you are intending to sell, gift, or otherwise dispose of assets. As ever, it might make sense to switch assets between spouses / civil partners so that they can share allowances. Assets with gains could be passed to a dying spouse / civil partner to wipe out gains on death. Where a person has died, appropriation of a property to beneficiaries with their own allowances is very often an effective way to erase or to reduce any gain in value since death when the property is sold. It would be best to market the property and appropriate it to beneficiaries prior to the CGT allowance reductions.
Our expert solicitors can empower you to make informed, tax efficient, decisions
The measures taken by the Chancellor after only a few weeks in post may only be the start of a more comprehensive overhaul of capital taxes legislation. It is likely that what we have got used to as standard tax mitigation options could be removed by our friend in No. 11 next time around.
So, acting now by seeking legal advice from one of our expert solicitors can make all the difference through empowering you to make informed, tax efficient, decisions.
Our experienced solicitors are here to give you their expert advice and to let you know the tax planning options that are currently available.