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We explain how we can help you to live your life to the full whilst maintaining your own financial security and giving others a helping hand too…


With the Budget approaching on 29th October, we consider the implications of recent reports calling for a radical review of inheritance tax including proposals to  replace it with a tax on gifting. We also consider how we can help you to deal with the challenges of changing legislation and the burden of inheritance tax. 

Over the summer it was revealed that revenue from inheritance tax had exceeded £5 billion for the first time, with families paying £5.228 billion in the last tax year (2017/18), an 8% increase (equating to an additional £388million) on the previous year. Treasury figures show that inheritance tax revenue is expected to hit £6.5bn in 2022, with 1 in 10 families forecast to fall into the inheritance tax net compared to 1 in 20 now.That said it still only represents 1% of the current total tax take and so it raises relatively little but is generally perceived as unfair.

Just as a reminder, when a person dies their estate (property, possessions, money) is taxed at a rate of 40% on any assets valued over the nil rate band  that pass to anyone other than the surviving spouse on death.  The current nil rate band is £325,000 for a single person or up to £650,000 for married couples or civil partners. The increase in inheritance tax revenue has occurred despite the introduction of the new residential nil-rate band in 2017, designed to reduce the burden for families passing on homes to their children. However this only applies to those with overall estates of less than £2m so in reality this helps very few of our clients.

Taxing Lifetime Gifts

Last month the Commission for Economic Justice published a report calling for the scrapping of inheritance tax altogether and replacing it with a ‘lifetime gift tax levied on the recipient’.  All gifts received during a person’s life over about £150,000 would be taxed at their applicable income tax rate. The idea is to stop people from being able to avoid the tax by gifting money or assets at least seven years before they die but how this would be practically policed under the current self assessment regime is anyone’s guess.

This chimes with the recommendations from a major report from the Resolution Foundation which also calls for a progressive tax rate starting at 20% and a tightening up and capping of reliefs for business and agricultural property reliefs; removal of the current IHT free treatment of pension funds and a scrapping of the current forgiveness of capital gains tax on death.

All this debate has been prompted by Chancellor Philip Hammond asking the Office of Tax Simplification (OTS) to carry out a public consultation and review of Inheritance tax earlier this year.  The extent of that review is potentially far reaching and their report is expected any time now.

So How Can We Help? 

We don’t believe in trying to second guess the way legislation will evolve or in complex planning that tries to exploit loopholes and inevitably invites HMRC challenge.  However, we do believe in active tax management and that making the most of the available inheritance tax allowances is as important as income or capital gains tax planning.

Every Little Counts! 

So using the annual allowance (£3,000 each) every year and taking advantage of the various small gift exemptions should not be overlooked.  Most significantly, taking advantage of the ability to gift surplus income with no seven year clock ticking is a legitimate planning strategy.

But How Generous Can You Afford to Be? 

A crucial part of our role is to help you to understand what you can afford to do. We use our bespoke lifetime cashflow modelling  tools to give you a realistic and visual context to those decisions and then help you to design structured gifting programmes that slowly reduce your inheritance tax exposure over time.

Asset Protection 

We know that our clients wealth has been hard earned so it’s important that your beneficiaries understand the implications of any gifting and that we help them to prepare for the responsibilities that come with managing family wealth and protecting that legacy for future generations.

Trusts remain a valuable planning tool, enabling you to get the seven year clock ticking whilst still retaining control of the underlying assets.  Trusts can also be particularly useful when you are helping the next generation onto the housing ladder, acting as a source of finance but with asset protection benefits on top.

It’s a Team Effort 

We work collaboratively with your other advisers bringing in specialists where necessary as sometimes more sophisticated planning is needed, particularly where large sums or property disposals are involved.

Give and Live

And finally it’s all about balance –  so our aim is to help you to live your life to the full and maintain your own financial security whilst giving others a helping hand too but without taking away their own work ethic and purpose.

Estate planning is part of any initial review that we undertake and sits at the heart of our AIMS modelling and ongoing review process, so it will always be on our agenda.  However, do call us if you feel you need to re-visit your estate planning or if you think we can help others who might be concerned about these issues. In the meantime we will be in touch again after the budget when we may know more…