Latest news with #InheritanceTax
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Scotsman
a day ago
- Business
- Scotsman
Not alone in thinking cash is still king
Rosemary Gallagher | Greg Macvean Photography 'Cash is king' is the well-used mantra. Well, at least it used to be. These days, more businesses are refusing it and only accepting card and contactless payments. Sign up to our Scotsman Money newsletter, covering all you need to know to help manage your money. Sign up Thank you for signing up! Did you know with a Digital Subscription to The Scotsman, you can get unlimited access to the website including our premium content, as well as benefiting from fewer ads, loyalty rewards and much more. Learn More Sorry, there seem to be some issues. Please try again later. Submitting... While I'm usually more than happy not to carry coins and notes and tap away when out and about, I got a wake-up call during a trip to London last week. I was hoping to get a dress altered for an awards ceremony, but the tailor I found only took cash. I tried to get a withdrawal from a nearby cashpoint only for my card to be swallowed up! A wave of panic hit as the card was the only payment method I had, and – as per –I had zero cash on me. Advertisement Hide Ad Advertisement Hide Ad Frantically, I called my bank who were, thankfully, very helpful. They instantly cancelled my card and I made arrangements to pick up cash from a local branch to last me for a couple of days until I got home to Scotland. By which time – hopefully – my new card should have arrived. But travelling around London with just cash is far from easy, due to the fact that so many businesses there will only accept card payments – which meant I was left feeling rather hungry on my train journey north from King's Cross. My experience is one of the reasons I see the value in the grassroots Campaign for Cash initiative. It argues that the increasing number of businesses refusing cash payments leaves many of us feeling excluded – especially older people, those with disabilities, and the financially director Martin Quinn told me: 'We formed with the purpose of protecting cash usage, our main aim is to persuade the government to pass a law to mandate cash acceptance in all shops and businesses. 'Millions of people rely on cash and, as we have seen with the recent power outages across Spain and Portugal, when the internet goes down, the only payment method with full resistance is cash. Advertisement Hide Ad Advertisement Hide Ad 'From a business perspective, the ever-increasing card charges imposed by [lenders] are eating into the slim profit margins of small shops, taking cash transactions helps to offset this.' It's been a busy old week in the world of financial services, with Westminster keen to clear their desks before summer recess began on Wednesday. On Monday came a policy paper on agricultural property and business property relief reforms covering Inheritance Tax liabilities, and the revival of the Pensions Commission was announced 'to confront the retirement crisis that risks tomorrow's pensioners being poorer than today's' – no mean feat .Looks like there will be plenty to discuss when Parliament resumes, and the build up to the Autumn Budget really begins.
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Scotsman
a day ago
- Business
- Scotsman
Realising the benefits of investing to achieve long-term goals
Tom Ham | Supplied Tom Ham, Group CEO at Calton, on moves to incentivise Cash ISA savers to go into investment Sign up to our daily newsletter – Regular news stories and round-ups from around Scotland direct to your inbox Sign up Thank you for signing up! Did you know with a Digital Subscription to The Scotsman, you can get unlimited access to the website including our premium content, as well as benefiting from fewer ads, loyalty rewards and much more. Learn More Sorry, there seem to be some issues. Please try again later. Submitting... Well, the UK Government is rushing to get everything off its desk in a mad scramble to get out the door for the summer holiday. The long-awaited draft legislation on Inheritance Tax changes for pensions and agricultural and business property has been released. Spoiler – neither are going away, so more on the technicalities of these soon. More exciting, however, is the new stuff being lobbed over the transom. There's the Pensions Commission, and a raft of reforms designed to funnel money out of cash savings and into investments. Here's some context to help separate the signal from the noise. The government is looking for growth and to inject capital into the UK markets. Fund flows into London-listed mandates have been declining for months, and new listings in the UK's IPO space have dropped to their lowest level for a half-year since records began in 1995. No-one wants to use the word bleak at midsummer, but this does not signal health or confidence. At the same time, global trends in personal finance show that people are holding a significant proportion of their wealth in cash. Vanguard reports this month that an estimated £1.7 trillion is sitting in cash savings across the OECD; the same report suggested that in the UK there is potentially £242 billion that could be turned towards both the government's and individual citizens' long-term financial goals. Do the markets have a right to people's money? Of course not. But we should ask why and how we might nudge this cash into investment and consider who might benefit. The savings cash-pile has accumulated because of policy, regulation and broad economic patterns on one hand, and financial education and behaviour on the other. Cynics might say the government has just identified a new reservoir of money to tap. Banks and building societies have pointed out that this money isn't inactive, it circulates through their lending activities too. That said, the Treasury has two motives for seeking to turn savers' money towards the market. First, the government – and surely everyone else – wants to reinvigorate the economy, to foster growth and instil confidence, though the jury is out on how much this will move the dial. Second, individuals holding money in cash accounts are not getting the same long-term return they might realise if they invested instead. This is a problem as personal savings, and taking responsibility for maximising them, become increasingly important as public finances deteriorate and defined contribution pensions are now the norm. To be clear, holding assets in cash isn't intrinsically bad – we frequently advise clients to do so. Your emergency fund of three to six months of living expenses needs to be in an easy-access account. As clients approach retirement, we increase the amount they hold in cash – often within pension or other investment wrappers – to protect from market events as they approach drawdown or the purchase of an annuity. At this stage we suggest having 12-18 months of living expenses available – not a small amount of money. But the Cash ISA is a subject of speculation. They are vastly popular because they are useful for short-term saving goals – easy to set up, easy to withdraw from, and a low-risk tax-wrapper shielding profits from Income Tax and Capital Gains Tax. If changes come, they will be to the annual tax-free allowance. Since ISAs arrived in 1999 the allowance for adult account holders has risen from £4,000 per annum to a grand £20,000. This can be shared amongst all members of the ISA family – the Stocks and Shares ISA, the Lifetime ISA and the Finance ISA, each with different rules, risks and rates of return. The most straightforward change to divert savings towards investment would be to reallocate the allowance across other types of ISA, stipulating a certain portion must go to an Investment ISA. However, this is when you slam into the two major barriers to investment – risk and cost. For example, opening a Stocks and Shares ISA involves declaring your awareness of the risk, being comfortable with it, and paying a percentage fee to your ISA provider. While you can make withdrawals from a Stocks and Shares ISA instantly, exposure to market falls means you are more likely to realise expected returns over a longer period – most experts advise a minimum five-year investment, but this is the kind of decision you might wish to seek more reassurance and advice on. So far, the Cash ISA remains untouched; it's now incumbent upon government and the advice profession to make the case for investment to help people with their long-term goals, and to show the benefits rather than be accused of making another cash grab.
Scotsman
a day ago
- Business
- Scotsman
Guidance on legacy issues and tax on estates
Andrew Sutherland | Supplied Q&A Andrew Sutherland of Acumen Financial Planning answers a widower's queries about his estate. Sign up to our daily newsletter – Regular news stories and round-ups from around Scotland direct to your inbox Sign up Thank you for signing up! Did you know with a Digital Subscription to The Scotsman, you can get unlimited access to the website including our premium content, as well as benefiting from fewer ads, loyalty rewards and much more. Learn More Sorry, there seem to be some issues. Please try again later. Submitting... Q I am a widower in my 80s. I was wondering if my estate will have to pay Capital Gains Tax on shares I hold when I die, or would they only be caught by Inheritance Tax [IHT] if I am above the ceiling? I have two houses, and shares totalling £564,000. My wife did not pay IHT. A While I can provide general commentary about the areas you raise, for specific recommendations or advice to be made, further information would be needed from you. The answer to your first question is that Capital Gains Tax (CGT) effectively dies with us. Your beneficiaries would stand to inherit your shares from you with a clean slate, and any future gains would be taxed from the value at the time they inherit them. Any amount of CGT payable in your lifetime can be managed and mitigated by using your annual allowances. Furthermore, your income position needs to be taken into account. One consideration for you at this stage will be Inheritance Tax. Whether this would apply to you is hard to establish at this stage, however: Each individual taxpayer in the UK benefits from a nil-rate band of £325,000. This is the first portion of your estate, which will not be liable to any IHT. Each individual also benefits from a residence nil-rate band of up to £175,000, contingent on your home having a value of that sum or more, the value of your overall estate not exceeding £2,000,000, and your home being passed on directly to your lineal descendants. This means that each individual can benefit from up to £500,000 of nil-rate bands before any IHT becomes payable. For spouses, there is no IHT to pay on assets inherited by the surviving partner. If your wife passed the entirety of her estate to yourself, then you will have inherited 100 per cent of her nil-rate bands, meaning you should only be liable for IHT on your estate above £1,000,000, depending on the value of your home. Based on you having two properties and a share portfolio, it is possible that you may have a potential liability to IHT should your estate exceed a million pounds, and the tax would be applied at a rate of 40 per cent on the value over that threshold. It would be wise to take action now, to achieve your best possible outcome. A deeper analysis will be required, and working with a qualified financial planner will provide the assistance, guidance – and advice if needed – that you require. Attending Acumen's IHT event at the Bonham Hotel in Drumsheugh Gardens, Edinburgh, on 27 August may help you, and be the first step to engaging a financial professional.
Daily Mirror
4 days ago
- Business
- Daily Mirror
Inheritance Tax rule change confirmed and how it will affect your loved ones
From April 2027, inherited pensions will be subject to Inheritance Tax and included in the 'estate' of someone who has died - here is what you need to know Grieving families will be forced to pay inheritance tax on pensions from April 2027 after a major shake-up was confirmed this week. Under current rules, if you die before the age of 75, the person inheriting your pension will not have to pay tax on your retirement savings. If you die after the age of 75, those who inherit your pension will pay Income Tax when they draw from it, as it will be treated as income. But from April 2027, inherited pensions will be subject to Inheritance Tax and included in the "estate" of someone who has died. The plans were first announced in the autumn 2024 Budget - but now, the Government has published draft legislation, outlining the changes. It confirms that the person receiving the inherited pension will be responsible for reporting and paying any Inheritance Tax due, as opposed to it being the responsibility of the pension provider. It also confirmed that death in service payments will not become liable for Inheritance Tax. HMRC estimates that about 10,500 estates in 2027/28 will have to pay Inheritance Tax in the 2029/30 financial year while 38,500 will face a larger bill. Steve Webb, partner at pension consultants LCP said: 'Life is tough enough when you have just lost a loved one without having extra layers of bureaucracy on top. 'In future, the person dealing with the estate will need to track down all of the pensions held by the deceased which may have any balances in them, contact the schemes, collate all the information and put it into an online calculator and then work out and pay the Inheritance Tax bill. 'All of this has to be done before a probate application can be made, potentially substantially slowing down the process of winding up an estate. 'Complications will no doubt arise where the family member cannot track down all of the deceased persons pensions or where providers are slow to supply the information needed to work out the IHT bill.' What is Inheritance Tax? Inheritance Tax is sometimes paid on the "estate" of someone that has died - this includes property, possessions and money. But under the current rules, very few people end up paying it. Inheritance Tax is only due for wealth transferred within seven years of death. If there is Inheritance Tax to pay, the standard rate you pay is 40% above anything above threshold, which is normally £325,000 - although this is often higher depending on who you leave your estate to. For example, there is no Inheritance Tax to pay when an estate is left to your spouse or civil partner. If you give away your home to your children - this includes adopted, foster or stepchildren - or grandchildren, then the Inheritance Tax threshold can increase to £500,000. This includes the basic £325,000 allowance, plus an additional £175,000. If you are married or in a civil partnership, any Inheritance Tax allowance that isn't used can be passed on when someone dies. This means a couple can potentially pass on as much as £1million without their estate being subject to Inheritance Tax. There are also ways to reduce how much Inheritance Tax is paid on your estate. Your rate of Inheritance Tax on some assets is reduced from 40% to 36% if you leave at least 10% of the net value after any deductions to a charity in your will.
Scottish Sun
5 days ago
- Business
- Scottish Sun
New Inheritance Tax rule change makes it harder for grieving families when a loved ones dies
Click to share on X/Twitter (Opens in new window) Click to share on Facebook (Opens in new window) A HUGE change to Inheritance Tax and pension has been confirmed this week in a blow to grieving families. The Government has confirmed that it will bring pensions into the scope of Inheritance Tax from April 6, 2027. Sign up for Scottish Sun newsletter Sign up 1 New Inheritance Tax rules will make it harder for grieving families to deal with a loved one's estate after they pass away Credit: Getty - Contributor Currently, money that is left in your pension after you pass away can be passed on to a loved one without needing to pay Inheritance Tax. But the loophole meant pensions were being used to avoid Inheritance Tax, instead of planning for retirement. The plans, which were first announced last October, are expected to pile more pressure onto grieving families. Loved ones of the deceased will now need to report and pay any Inheritance Tax on money left in pension funds and death benefits. But under previous proposals it would be up to the executor of the estate to find out how much money was left in each pension and calculate how much Inheritance Tax would be due. The measures will also force thousands of families to pay Inheritance Tax for the first time, while reducing the amount of money they will receive from a loved one. The government estimates that of around 213,000 estates that will inherit pension wealth in 2027/28, around 10,500 will now be forced to pay Inheritance Tax. Meanwhile, approximately 38,500 will have to pay more death duties than would have previously. As a result, the average Inheritance Tax bill is expected to increase by around £34,000. The news comes as Inheritance Tax receipts for April to June 2025 hit £2.2billion, which is £0.1billion higher than in the same period last year. How does Inheritance Tax work? Inheritance Tax is currently charged at 40% on the property, possessions and money of someone who has died if they are worth more than £325,000. Fewer than one in 20 estates currently pay death duties as most fall below this threshold. But the tax is forecast to bring in around £9.1billion in 2025-26. Under the plans pensions will form part of an estate over £325,000 too. What are the different types of pensions? WE round-up the main types of pension and how they differ: Personal pension or self-invested personal pension (SIPP) - This is probably the most flexible type of pension as you can choose your own provider and how much you invest. - This is probably the most flexible type of pension as you can choose your own provider and how much you invest. Workplace pension - The Government has made it compulsory for employers to automatically enrol you in your workplace pension unless you opt out. These so-called defined contribution (DC) pensions are usually chosen by your employer and you won't be able to change it. Minimum contributions are 8%, with employees paying 5% (1% in tax relief) and employers contributing 3%. - The Government has made it compulsory for employers to automatically enrol you in your workplace pension unless you opt out. These so-called defined contribution (DC) pensions are usually chosen by your employer and you won't be able to change it. Minimum contributions are 8%, with employees paying 5% (1% in tax relief) and employers contributing 3%. Final salary pension - This is also a workplace pension but here, what you get in retirement is decided based on your salary, and you'll be paid a set amount each year upon retiring. It's often referred to as a gold-plated pension or a defined benefit (DB) pension. But they're not typically offered by employers anymore. - This is also a workplace pension but here, what you get in retirement is decided based on your salary, and you'll be paid a set amount each year upon retiring. It's often referred to as a gold-plated pension or a defined benefit (DB) pension. But they're not typically offered by employers anymore. New state pension - This is what the state pays to those who reach state pension age after April 6 2016. The maximum payout is £203.85 a week and you'll need 35 years of National Insurance contributions to get this. You also need at least ten years' worth to qualify for anything at all. - This is what the state pays to those who reach state pension age after April 6 2016. The maximum payout is £203.85 a week and you'll need 35 years of National Insurance contributions to get this. You also need at least ten years' worth to qualify for anything at all. Basic state pension - If you reach the state pension age on or before April 2016, you'll get the basic state pension. The full amount is £156.20 per week and you'll need 30 years of National Insurance contributions to get this. If you have the basic state pension you may also get a top-up from what's known as the additional or second state pension. Those who have built up National Insurance contributions under both the basic and new state pensions will get a combination of both schemes. The change could cause a huge shift in how people plan for retirement and spend their savings. Julie Hammerton, managing partner at Hymans Robertson Personal Wealth, said: 'With pensions coming into the Inheritance Tax Regime from April 2027, it's more likely pensions will be accessed for an income in retirement, rather than a means through which wealth can be passed on to future generations.' She added that the changes may change the order in which people access their long-term savings. Meanwhile, it could cause pensions to be 'spent' more in retirement or could cause more gifting of withdrawn pension funds to dependents. She added that it may also cause an uptick in annuity purchases, which give you a guaranteed income when you retire for the rest of your life. This is because annuities remove pension pots from the deceased person's estate. Meanwhile, former pensions minister Steve Webb has warned that the measures could make it harder to wind up a person's estate. 'The person dealing with the estate will need to track down all of the pensions held by the deceased which may have any balances in them, contact the schemes, collate all the information and put it into an online calculator and then work out and pay the Inheritance Tax bill,' he said. 'All of this has to be done before a probate application can be made, potentially substantially slowing down the process of winding up an estate.' Probate is the legal process of dealing with a person's death. Obtaining probate itself can take many months, which means finalising the financial affairs of a loved one can be a drawn out process. Steve Webb added that complications will no doubt arise when a family member can't track down all of the deceased person's pensions. They may also face complications if a provider is slow to give the information needed to work out the Inheritance Tax bill. He added that HM Revenue and Customs (HMRC) may need to consider the rules around the penalties for paying Inheritance Tax late to make sure that grieving families are not hit with fines due to delays that are not under their control. Unmarried partners could also be at a disadvantage due to exemptions for estates, which mean married couples can pass wealth on to one another tax-free. What will the new process be? According to the the Government's consultation, where the deceased person has one or more pensions which form part of the estate, the process will be as follows from next April: Loved ones already need to report and pay Inheritance Tax on the deceased's estate, including for certain pension schemes. They will now need to report and pay the Inheritance Tax due on discretionary pensions but all parties will need to work together to do this. Personal representatives will need to collect and share information from all the deceased's pension schemes and pension beneficiaries. They already need to contact all the pension schemes, but will now need to collect information if needed for filing an Inheritance Tax account. The loved one will also need to report the amount of tax attributable to each pension scheme. HMRC said it will give family members, pension scheme administrators and beneficiaries clear guidance, a calculator to advise if Inheritance Tax is due and a straightforward system to pay the tax liability. Do you have a money problem that needs sorting? Get in touch by emailing money-sm@ Plus, you can join our Sun Money Chats and Tips Facebook group to share your tips and stories
