Inheritance Tax changes welcomed

Chancellor Alistair Darling announced in his Pre-Budget speech a change to the way in which the inheritance tax (IHT) nil rate band of £300,000 can be used for married couples and civil partners.

 
In order to understand the implications of the change it is important to have an understanding of the principles of IHT. Transfers of property between spouses or civil partners are generally exempt from IHT. This means that if an individual dies and leaves some or all of their property to their spouse or civil partner, then this is not chargeable to IHT. If they do not have sufficient assets which they are willing or able to leave elsewhere then they may not fully use their nil rate band.
 
This problem with ‘wasting’ the nil rate band, combined with large increases in the value of many family homes, has meant than many families had been inadvertently drawn into the IHT net.
 
The Pre-Budget change means that any nil rate band unused on the first death may be used when the surviving spouse or civil partner dies.
 
This change is effectively backdated for widows or widowers whose spouse died before the announcement of the change, as long as the ‘surviving’ spouse or civil partner dies on or after 9 October 2007. The amount of the nil rate band available for transfer will be based on the proportion of the nil rate band which was unused when the first spouse or civil partner died.
 
The following gives an example of how the rules will work:

Mr Smith’s Will states that on his death he will leave his estate including his share of the family home to his wife. At the date of his death the nil rate band is £300,000.

 
On Mrs Smith’s death she will be able to make use of her own nil rate band of say £350,000 (which is the band proposed for 2010/11) together with the unused percentage of her late husband’s nil rate band being a further £350,000. Her total nil rate band will be £700,000.
 
This is a significant change that will affect many families. Please do contact us if you would like more information on this issue and how it will affect your circumstances.
 
Internet Link: HMRC notice

more from Tax

Higher income parents receiving child benefit must register for Self Assessment
HMRC are reminding parents with higher incomes who continued to receive Child Benefit after January 2013 that they must register for Self Assessment by 5 October 2013 to avoid any penalties in relation to the High Income Child Benefit Charge.
2011/12 Tax Return Amnesty
HMRC have launched a tax return 'amnesty' for those individuals who have been issued with a self assessment tax return or notice to complete a tax return for any year up to 2011/12 and have not completed the return(s).
HMRC target those with outstanding VAT returns
HMRC have introduced the VAT Outstanding Returns Campaign, which is an opportunity for taxpayers to bring their VAT returns and payments up to date.
Paper tax return deadline of 31 October 2012
Please remember the deadline for filing a paper tax return online expires at 31 October 2012, a paper submission after this date will result in penalties of at least £100.
What is a car, commercial vehicle or motor home for VAT?
HMRC have updated their guidance on the classification of vehicles for VAT purposes.
HMRC targets East Midlands businesses
HMRC has six new taskforces, some of which specifically target East Midlands businesses, including Taxi firms, Property rentals and Restaurants.
Latest HMRC IR35 guidance
HMRC have released guidance setting out their risk-based approach to checking compliance with IR35.
Child Benefit tax charge - how it will work...
Legislation will be introduced to impose a new charge on a taxpayer who has adjusted net income over £50,000 in a tax year where either they or their partner are in receipt of Child Benefit for the year,
HMRC sends penalty letters to 17,000 by mistake
It has been reported that HMRC have issued 17,000 final reminder letters in error.
HMRC sets its sights on home improvement traders and missing tax returns
HMRC has announced the focus of its campaigns to be implemented later this year
HMRC now able to accept faster payments
H M Revenue & Customs have announced that they are now able to accept payments made using the Faster Payments Service (FPS).
HMRC now target electricians
We have been advised HMRC is continuing its targeted campaigns into tradespeople with vigour with the announcement of the Electricians Tax Safe Plan (ETSP).
New £3,000 PAYE coding limit
HM Revenue & Customs (HMRC) increased the maximum amount for coding out tax underpayments via PAYE from £2,000 to £3,000 as from 20 July 2011.
HMRC extend Business Records Checks
HM Revenue & Customs have announced that they are extending their Business Records Checks programme.
HMRC Time to Pay restrictions
How a company chooses to remunerate its director/shareholders could affect HMRC’s opinion on “Time to Pay” (TTP) arrangements
HMRC reminder of new tax return penalties
HM Revenue & Customs is reminding individuals and businesses about new Self Assessment penalties for late returns and late payments, which come into effect this autumn.
VAT Amnesty
HM Revenue & Customs have announced an initiative to crack down on VAT rule breakers. The new campaign will focus on individuals and businesses who are trading above the VAT threshold but who have not yet registered for VAT.
New Self Assessment penalties for late filing and late payments
HM Revenue & Customs has recently issued a reminder that the new penalty regime for
late filing and late payment of Income Tax Self Assessment (ITSA) Tax Returns applies for 2011/12.
Individual Savings Accounts (ISA) - Planning ahead
Probably the most important piece of year-end tax planning is to make sure you have used up your full Individual Savings Account (ISA) limit for 2010/11.
Online filing of VAT Returns
The HMRC is pressing ahead with encouragement to file electronically.
Changes to Capital Allowances
New rules which come into force for 2009/10, in particular a new car regime.
Year End Planning
Essential tax planning tips for the end of the tax year.
Reduction of Payments on Account
HM Revenue and Customs have been experiencing problems with their online claims to reduce payments on account for the 31 January 2009 deadline.
Inheritance Tax changes welcomed
Chancellor Alistair Darling announced in his Pre-Budget speech a change to the way in which the inheritance tax (IHT) nil rate band of £300,000 can be used for married couples and civil partners.
Capital Gains Tax Taper Relief to be abolished
The Pre-Budget speech also included the shock announcement that taper relief for capital gains tax (CGT) will be abolished from 6 April 2008.
Verification is not an Employment Status Check
In March 2007, contractors were sent lists (CIS333) of subcontractors, showing subcontractors that do not have to be verified following the launch of the new Construction Industry Scheme in April 2007.
Nil payment notifications
Nil payment notifications
CFW Accountants

Northants Chamber of Commerce Member  ACCA  ICAEW
privacy statement - terms of use

CFW Accountants and Business Advisers