Latest news with #DanielHough
Telegraph
27-05-2025
- Business
- Telegraph
Families face shock £2m death tax bills on gifts gone wrong
Thousands of families have been hit with shock tax bills of up to £2m after relatives died less than seven years after making a gift. In the tax year 2021-22, the latest year for which data is available, there were 12,700 gifts made less than seven years before death, at an average value of £157,000. This is down from 13,380 failed gifts the year before, when the average value was slightly less, at £156,000, according to data released by HMRC under Freedom of Information rules. Inheritance tax is paid at 40pc of anything left over a tax-free threshold of £325,000, known as the nil-rate band. But gifts – or 'Partially Exempt Transfers' (PETs) – made more than seven years before death are exempt. However, if the person who made the gift does not survive a further seven years, their family must pay inheritance tax on the value of the gift on top of the rest of the remaining estate. Estimates suggest that the total extra tax paid on the failed gifts could be as high as £800m, but some families will have faced bills of millions. The average value of the top 50 gifts was £5.05m – compared to £3.6m the year before. Tax experts estimated that the largest failed gifts could attract inheritance tax bills as high as £2m. Daniel Hough, financial planner at wealth manager RBC Brewin Dolphin, said: 'The latest failed PETs stats, which show that inheritance tax receipts are on the increase, seem to indicate that many people are leaving it too late to discuss provisions for others. 'Our advice to clients is that once they have secured their own income requirements, they should l ook at options to pass their wealth to the next generation.' Spouses can leave their assets to their partner without triggering a tax bill, but parents cannot pass their estate on to their children tax-free. If a home is included in the estate, an extra £175,000 is given as a ' residence nil-rate band '. It comes ahead of a Labour inheritance tax raid on pensions. Chancellor Rachel Reeves announced at her inaugural Budget last October that from April 2027, leftover pension wealth would be included in an estate for inheritance tax purposes. Mr Hough said that the changes could mean that parents gave away money earlier, reducing the number of failed gifts. He said: 'In terms of the future direction of inheritance tax receipts, although difficult to guess, we could potentially see a reduction from 2025 onwards due to the inclusion of pensions for inheritance tax from April 2027, as more people seek financial advice earlier with their estate planning.' Mike Hodges, partner at tax firm Saffery, said: 'The latest HMRC figures on failed PETs are really quite startling. 'My sense is that with the inheritance tax nil-rate band now frozen until 2030, at which point it will be celebrating its 21 st birthday at this level, people are increasingly looking at what else they can do, and one option is to make lifetime gifts.' A Treasury spokesman said: 'More than 90pc of estates are forecast to have zero inheritance tax liability in the coming years and people can pass on up to £1m without being liable. 'The tax is forecast to raise more than £14bn a year by 2030, money that will help to fix our public services as part of our Plan for Change.'
Yahoo
27-05-2025
- Business
- Yahoo
Families face shock £2m death tax bills on gifts gone wrong
Thousands of families have been hit with shock tax bills of up to £2m after relatives died less than seven years after making a gift. In the tax year 2021-22, the latest year for which data is available, there were 12,700 gifts made less than seven years before death, at an average value of £157,000. This is down from 13,380 failed gifts the year before, when the average value was slightly less, at £156,000, according to data released by HMRC under Freedom of Information rules. Inheritance tax is paid at 40pc of anything left over a tax-free threshold of £325,000, known as the nil-rate band. But gifts – or 'Partially Exempt Transfers' (PETs) – made more than seven years before death are exempt. However, if the person who made the gift does not survive a further seven years, their family must pay inheritance tax on the value of the gift on top of the rest of the remaining estate. Estimates suggest that the total extra tax paid on the failed gifts could be as high as £800m, but some families will have faced bills of millions. The average value of the top 50 gifts was £5.05m – compared to £3.6m the year before. Tax experts estimated that the largest failed gifts could attract inheritance tax bills as high as £2m. Daniel Hough, financial planner at wealth manager RBC Brewin Dolphin, said: 'The latest failed PETs stats, which show that inheritance tax receipts are on the increase, seem to indicate that many people are leaving it too late to discuss provisions for others. 'Our advice to clients is that once they have secured their own income requirements, they should look at options to pass their wealth to the next generation.' Spouses can leave their assets to their partner without triggering a tax bill, but parents cannot pass their estate on to their children tax-free. If a home is included in the estate, an extra £175,000 is given as a 'residence nil-rate band'. It comes ahead of a Labour inheritance tax raid on pensions. Chancellor Rachel Reeves announced at her inaugural Budget last October that from April 2027, leftover pension wealth would be included in an estate for inheritance tax purposes. Mr Hough said that the changes could mean that parents gave away money earlier, reducing the number of failed gifts. He said: 'In terms of the future direction of inheritance tax receipts, although difficult to guess, we could potentially see a reduction from 2025 onwards due to the inclusion of pensions for inheritance tax from April 2027, as more people seek financial advice earlier with their estate planning.' Mike Hodges, partner at tax firm Saffery, said: 'The latest HMRC figures on failed PETs are really quite startling. 'My sense is that with the inheritance tax nil-rate band now frozen until 2030, at which point it will be celebrating its 21st birthday at this level, people are increasingly looking at what else they can do, and one option is to make lifetime gifts.' A Treasury spokesman said: 'More than 90pc of estates are forecast to have zero inheritance tax liability in the coming years and people can pass on up to £1m without being liable. 'The tax is forecast to raise more than £14bn a year by 2030, money that will help to fix our public services as part of our Plan for Change.'
Daily Mail
08-05-2025
- Business
- Daily Mail
Wealthy people will avoid inheritance tax raid on their pensions by taking more HOLIDAYS
Many people with large pensions intend to splash out on more holidays to avoid a new inheritance tax levy, research reveals. Pensions are going to become liable for death duties like other assets such as property, savings and investments starting in April 2027. Well over half of over-45s with at least £300,000 already set aside for retirement plan to spend more to dodge inheritance tax, with taking holidays easily their fondest desire. Enjoying experiences with family - which could also mean going on holiday - was their second favourite objective, closely followed by making gifts to family. 'The results of our survey back up what we have experienced in terms of enquiries since October's Budget,' says Daniel Hough, financial planner at RBC Brewin Dolphin. 'Retirees and people approaching retirement are increasingly looking to spend more of their pension, rather than risk a big portion of it being lost to inheritance tax when they pass away.' Hough adds: 'The fact that the vast majority of respondents are planning to spend more on holidays is unsurprising – we've seen a number of cases where parents or grandparents have decided to pay to take the whole family away on five-figure trips so that they can experience something special.' The Government said in the Autumn Budget that it is 'removing the opportunity for individuals to use pensions as a vehicle for inheritance tax planning' by bringing unspent pots into the scope of inheritance tax. Only the richest 4 or 5 per cent of families currently pay inheritance tax, which is charged at 40 per cent on assets above the key thresholds - though that is expected to rise significantly when pensions start being counted towards the levy. With frozen thresholds and higher property values also inflating inheritance tax bills, the Treasury is now predicted to rake in a total of £66.9billion between 2024 and the end of the decade, when the annual take will hit £14.3billion. The Office for Budget Responsibility forecasts receipts of £9.1billion in the current tax year, rising to £11.7billion in 2027-2028, the first year that pensions become liable for inheritance tax. The Government's plan to impose inheritance tax on death benefits too has received far less attention, but could be even more significant to some grieving relatives. > How to avoid paying IHT on your pensions: Find out below Some 56 per cent of middle-aged and older people with more than £300,000 already saved for retirement plan to spend more of their fund to stop it falling into the hands of the taxman, an RBC Brewin Dolphin survey found. But 27 per cent don't intend to change their plans, and 17 per cent didn't know, according to the poll of 1,045 adults, one thousand of whom were aged 45-plus. Among those who have decided to spend more, 75 per cent will take more holidays, 40 per cent will prioritise experiences with family, 39 per cent will gift more to family members, and 10 per cent will pay off mortgages or other debts. Other objectives mentioned, but less frequently, were buying a new house, making home improvements and getting a new car. RBC Brewin Dolphin cautioned that the inheritance tax changes for pensions are not scheduled until 6 April 2027, and detailed legislation has not yet passed so it is advisable to wait for that before making any significant spending decisions. Hough says: 'There is, of course, nothing wrong with wanting to live as full a life as possible and spend money on your family so that they remember having an incredible time with you. 'But, there are also inevitably risks in doing too much of that. People need to be very careful not to go overboard and leave themselves short for the remainder of their retirement.' He adds: 'We would encourage people not to let the prospect of paying more in tax be the main driver behind any significant spending decisions or lifestyle changes.' RBC Brewin Dolphin survey found 60 per cent of the wealthy pension savers it surveyed had either got financial advice already or planned to in future, but the rest would not do so. How to cut inheritance tax on pensions Changes to inheritance tax don't come in until April 2027, but people are being advised to review existing arrangements well in advance. Some are looking to cash in as much of their pensions as possible while avoiding a big income tax bill - although it is better to avoid crystallising losses by making bigger pension withdrawals in market downturns. Other options include gifting out of surplus income which remains inheritance tax free providing you can afford it, or buying life insurance and putting it in trust. Some savers will be deciding whether to leave more or all of their estate to spouses - who can still benefit from estates free of inheritance tax - instead of their children to delay and minimise the eventual bill. Wealth manager Evelyn Partners has suggested we could see a marriage boom or rise in civil partnerships among older couples as a result. Evelyn's financial planning partner Gary Smith suggests six ways to cut inheritance tax on pensions here. How much is inheritance tax and who pays? Inheritance tax is levied at 40 per cent on estates above a certain size. You need to be worth £325,000 if you are single, or £650,000 jointly if you are married or in a civil partnership, for your loved ones to have to stump up inheritance tax. A further allowance, the residence nil rate band, increases the threshold by £175,000 each - so £350,000 for a married couple - for those who leave their home to direct descendants. This creates a potential maximum joint inheritance tax-free total of £1million. This own home allowance starts being removed once an estate reaches £2million, at a rate of £1 for every £2 above the threshold. It vanishes completely by £2.3million. Chancellor Rachel Reeves said in the Budget these thresholds will be frozen until 2030.
The Independent
14-03-2025
- Business
- The Independent
Six-week pension delays after Rachel Reeves's Budget triggers panic
The chancellor 's October inheritance tax raid has sparked a surge in people seeking to take their cash out of retirement pots in a bid to avoid paying the levy, after Ms Reeves scrapped an exemption on them. One person was left waiting two months for their payment, it has emerged. Currently, the levy is charged at 40 per cent on assets over £325,000, with those passing on their main homes eligible for an extra £175,000 allowance meaning couples can pass on up to £1 million tax free. But the changes, set to come into effect in April 2027, mean savers will see their pension pots counting towards the tally, dragging thousands more into paying inheritance tax. It has led to a surge in retirees looking to withdraw cash from their pensions and spend it now in a bid to minimise their tax liabilities, leading to delays in the system, The Telegraph reported. Daniel Hough, of wealth manager RBC Brewin Dolphin, said: 'There are widespread delays for people looking to withdraw money from their pensions, because providers have been inundated with requests since October's Budget. 'While prior to Christmas it would typically take around two weeks from receipt of the instruction or payment request, now it is nearer to six – we even had a case where it took two months for the client to receive their cash. 'It is no coincidence that this ties in with pensions being brought within individuals' estates for inheritance tax purposes, from April 6, 2027. In response, many people have come to the conclusion that they would rather spend the money, so are looking to cash in on their pension savings.' When savers reach aged 55, they are eligible to withdraw a quarter of their pension tax free as a lump sum, with those made after subject to income tax. 'Tax-free lump sums appear to be taking longer, as they are, by definition, free of any taxation consequences,' Mr Hough added. He said: 'Whether your pension provider is large or small, the delays are the same across the board. If you submit instructions, be prepared for the fact that it might take four or five weeks to complete, and speak to your financial advisor about the knock-on effect this may have for your financial situation in the coming months.' The Treasury has been contacted for comment.
