A Leamington lawyer believes loved ones can still avoid a huge tax bill on their inheritance despite a government crackdown.
Her Majesty’s Revenue & Customs has made it more difficult to find tax mitigation schemes and recent proposals from the Chancellor in his budget have closed loopholes rendering certain tax planning schemes redundant.
The recent high-profile case of Princess Margaret’s children having to sell her jewellery to help pay an inheritance tax bill of £3 million highlights the potential tax burden that can occur.
But John Rouse, of 200 strong law firm Wright Hassall, said there are still ways for people to plan ahead and ensure their inheritance is not hit for more tax than necessary.
He said: “All is not lost as there are still plenty of tax planning opportunities available if people take the necessary advice.
“For instance, married couples and civil partners can make wills to pass up to £570,000 tax free.
“Also, if you have inherited money from a relative, there is a scheme that allows you to receive the money via a trust but still save or spend it – while not increasing the value of your own estate for inheritance tax purposes.
“Death in service and pension benefits can also be dealt with in a tax friendly manner to reduce the potential tax burden.”
But Rouse has warned that there could be some complications when it comes to the age of a child’s inheritance.
The Chancellor's proposals would mean that there is a tax charge both on the parent's death, as currently applies, and again on the child's inheritance which might not be until 21 or 25.
He said: “It seems this new ruling will be implemented and it could cause problems and is unfair as delaying the age of inheritance for minor children in wills and trusts was never intended to be a way of avoiding or reducing tax, but as a means of ensuring the beneficiary was financially mature enough to receive money.
“The change will potentially affect a very large number of people and create an extra tax charge.”
