Latest news and Articles

MARCH 2011

“I want to make giving 10% of your legacy to charity the norm in our country” So said George Osborne in his Budget speech.  The Government has announced that a reduced rate of inheritance tax (IHT) will apply where 10% or more of a deceased’s net estate is left to charity.  In those cases the current 40% rate will be reduced to 36%.  The new rate will apply where death occurs on or after 6 April 2012.

Consultation is due to take place before draft legislation is published at the end of the year and it is not until then that the details will be known.  Uncertainty surrounds exactly what will be deducted from the value of the Estate to give the “net Estate” of which 10% must be given away.  It is clear that the Nil Rate Band, any transferable Nil Rate Band, assets covered by spouse exemption and any inheritance tax reliefs (excluding the charitable donation itself) will be deducted in arriving at the base line for calculating 10%.  This means that the amount needing to be donated to charity to qualify for the reduced rate will in most cases be well below 10% of the actual estate.

It is as yet unclear what will be the impact of gifts which the deceased person failed to survive by 7 years, property passing on survivorship, gifts with reservation and interests in possession.

Individuals now face a decision as to whether it is preferable to leave a donation in a Will or to benefit from Gift Aid on lifetime donations.  Families facing an inheritance tax bill should take specialist advice as to which is likely to be more advantageous in their particular circumstances.  We will be glad to discuss this with you.

Estate planning measures announced in the Budget are:

• A significant tax boost for entrepreneurial investments.  Individuals will have a lifetime allowance of £10m to put into Enterprise Investment Scheme investments which qualify for the 10% rate of Capital Gains Tax.  This is double the current lifetime limit and takes effect from April 2011.
• From April 2012 the Capital Gains Tax annual exempt amount will rise in line with the Consumer Prices Index instead of the Retail Prices Index.  This means that it will increase more slowly.
• The 50% Income Tax rate was confirmed as a “temporary measure” and the Chancellor has asked HMRC to calculate how much extra tax it raised in its first year.
• In 2012, the annual charge for non-doms who have lived in the UK for 12 years will rise from £30,000 to £50,000, subject to consultation.
  

If you would like further information about the issues raised in this article please contact Clare Jeffries, or another member of Goodman Derrick LLP’s Private Client Team on 0207 404 0606.

This guide is for general information and interest only and should not be relied upon as providing specific legal advice.