- in United States
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The Times reported today that in 2022-23 14,030 lifetime gifts were liable to Inheritance Tax (IHT) on the death of the donor. The suggestion is that these gifts 'went wrong'. That isn't necessarily true, more likely that either the death was unexpected or the planning started too late and was a bit of a punt, rather than expected to be successful. It also has to be remembered that the gift value is based on the value at the date of the gift rather than the value at death. Had there been no gift, there may have been a good few years of income and growth on that asset that would have been within the estate. Failing to survive 7 years doesn't necessarily mean the planning failed completely.
Frozen IHT thresholds, the recent changes to Agricultural Property Relief and Business Property Relief that will come into effect in April next year and the pension changes due to come in from April 2027 mean the Office for Budget Responsibility are forecasting that Inheritance Tax revenue will almost double over the next five years to £14.3bn per year.
In 2022-23 5% of estates paid IHT, this is forecast to rise to 10% of estates by 2029-30.
The Autumn budget did not bring the wholesale changes to IHT that many feared;
- The 7 year survivorship period for gifts is unchanged;
- Taper relief on gifts that are survived by 3 years and result in the payment of IHT survived;
- The exemption for gifts, as normal expenditure from surplus income, remains.
The biggest issue for IHT planning remains frozen thresholds and knowing when to gift, alongside whether you are prepared to change your lifestyle to reduce the tax burden on your estate.
These are conversations that at Hunters we are very used to having, they are difficult but important. We have a wealth of experience helping clients find the strategy that is right for them. Gifting is not easy for many reasons, including the link with capital gains tax for gifts of assets that are not cash. The key thing is to start the conversation at a time when all options are open to you, and you are open to considering all the options.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
