Families warned to act 'carefully' ahead of predicted Inheritance Tax change in Budget
by Samantha Leathers, Barbara Hodgson · ChronicleLiveAhead of the upcoming Autumn Budget, Inheritance Tax has become a much talked-about issue with many expecting its 'gifting rules' to be reviewed.
Chancellor Rachel Reeves is set to deliver Labour’s first financial statement of the season on October 30 and it seems likely to be a tough one, containing potential 'painful' tax adjustments, following an early warning issued by Sir Keir Starmer, reports The Express. In readiness, experts from wealth management company RBC Brewin Dolphin are advising families to urgently review their inheritance tax and insurance plans before the big day.
Inheritance Tax gifting rules are said to be used by many people as a 'backdoor' to pass on chunks of their wealth tax-free years before their death. Now, with an overhaul of the tax apparently likely, financial planner Carla Morris has come up with some advice which involves making proactive moves rather than knee-jerk reactions.
She raises concerns that families, in an attempt to dodge incoming changes, might rush into decisions that could do more harm than good. "Inheritance tax is paid by a few but feared by all," she said.
She encourages people to consult with finance professionals ahead of the budget announcement to avoid knee-jerk reactions. And, in view of the gifting involved, she stresses it is vital to keep sufficient funds in case of any unforeseen future care needs.
Its seven-year rule means gifts made more than seven years before death are not subject to Inheritance Tax but if the person making the gift passes away within those seven years, then their loved ones could face a hefty tax bill with rates from eight per cent to 40%, depending upon when the gift was given.
The specialist points out that this often leaves grieving families in shock and facing unexpected taxes due to gifts made by the deceased years earlier. To counteract tax work-arounds, there is talk of the Budget extending the standard seven-year period to secure tax-free gifting status, to 10 years, which could worsen the families' situation.
Morris believes this potential change could spark earlier financial planning discussions among families, emphasising the need to obtain advice now, given the possible extended look-ahead required to secure personal financial security. She advised: "A carefully considered lifetime gifting plan can ensure a client gets to see the positive difference they can make to their families lives and financial security but it needs careful advice and managing, which could include life cover, trusts and definitely needs good record-keeping.
"To ensure you can enjoy a long and comfortable retirement as well as help your family, it is crucial to plan ahead and take advice."
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