THE Chancellor’s proposal for a “transferable nil-rate band� between spouses and civil partners in his recent pre-Budget Report means it’s now possible for the surviving spouse to “double up� on the nil rate band on gifts made by them under their will.
Prior to this, it was possible for married couples to pass almost unlimited assets to each other without paying inheritance tax.
This had the effect of increasing the level of the surviving spouse’s assets and their estate was liable for tax at 40% if above the nil rate band (currently £300,000).
The way in which the new regulations work means that whatever nil rate band is not utilised on the death of the first spouse, is now available on the death of the second.
However, if the first death has taken place and the nil rate band was settled into trust, then the whole of the nil rate band was utilised and the tax- free sum for the first to die is set in stone.
In these circum- stances, it will not be possible to benefit from the double nil rate bands, and in effect these estates will pay more IHT. If a nil rate band has been set up within the last two years, it is still possible to take advantage of the new regulations.
While I applaud any measures which mean that average families will save on IHT, I believe the measures to have been “cobbled together� with undue haste. The Government has long told us that IHT is a tax people pay out of choice. It now appears to be penalising those who have taken their advice!
DAWN JOUGHIN is the head of wills, trust and probate at Goodmans.