Latest news with #inheritanceTax
BBC News
a day ago
- Business
- BBC News
Inheritance tax: Family farms in 'turmoil' over changes says NFU
Inheritance tax changes announced by the chancellor last October have thrown Welsh family farms into "turmoil", a farming union has plans to tax inherited agricultural assets worth more than £1m at a rate of 20% were announced in Rachel Reeves' first Labour Cymru President Aled Jones told MPs, on Wednesday, there was a need for "compassion" as "vulnerable people" were in the "eye of the storm". He suggested there was another way the Treasury could raise the £2bn a year UK government has defended its inheritance tax reforms, describing them as "vital". There were protests across the UK after the Budget announcement, in October, that inherited agricultural properties worth more than £1m would be subject to inheritance tax at 20% - half the usual rate - from April UK government has said the changes will only affect the wealthiest 500 farms each year, but farming groups argue as many as 70,000 could be affected. Mr Jones told the Welsh Affairs Committee farming families were "going through some very difficult conversations, particularly when there are older members at a stage of life who find it very difficult to deal with these issues". "The announcement last October has thrown lots of these family businesses into turmoil," he said."I ask for compassion for these people - they need to be taken from the eye of the storm." Mr Jones said farming union leaders had suggested to the Treasury an alternative approach, the introduction of a "clawback mechanism" on money raised from selling land when it is not to be used for food production."That money should, in my opinion, be taxed."If you like, tax it at 40%, rather than 20%. These are the mechanisms that are operational in other countries."A farmer transferring from one generation to the other, there's not a single penny that arrives in their pockets."It's something really to continue that farm business for generations to come." The UK government maintains that under its changes three quarters of estates would continue to pay no inheritance tax at all, while the remaining quarter would pay half the inheritance tax that most people say that that payments could be spread over 10 years, interest-free.
Telegraph
a day ago
- Business
- Telegraph
The little-known alternative to trusts that could help you dodge inheritance tax
In a bid to minimise the effects of Labour's looming inheritance tax raid, increasing numbers of people are turning to Family Investment Companies (FICs) as a means of protecting their hard-earned wealth. Despite being less widely known than trusts, they are becoming the 'go-to' option for inheritance planning and, while they have traditionally been of interest for the ultra wealthy, you don't necessarily have to be a high net-worth individual to benefit. However, there are lots of ways these companies can be set up and the rules can be complex. Here, Telegraph Money delves into the complex world of FICs to detail how setting up a company can prevent a huge inheritance tax bill. What is a Family Investment Company? How to set up a Family Investment Company? What's the difference between a Family Investment Company and a trust? Why is there a rise in demand for Family Investment Companies? Do Family Investment Companies pay corporation tax? What fees can you expect to pay? What are the downsides of using a FIC? What is a Family Investment Company? A Family Investment Company is typically a private limited company designed to pool family assets. There are several ways these companies can be set up, which can each fulfil different purposes – but they can be used to pass wealth to children or other family members in a tax-efficient way. Usually set up by parents or grandparents, the company is owned by family members. These tend to attract interest from the ultra-wealthy, however, tax advisers said it's now common for a broader £2m to invest. One of the most common uses of a FIC is to essentially put a 'lock' on an estate's value – this may be a concern if, for example, growth could erode inheritance tax allowances. Here, parents can set up a FIC they loan money to, and have any growth in the value of the company go to the children (note that this option may often be combined with a trust to hold the shares where the older generation wishes to retain full control of the company and who can benefit). Alternatively, parents could establish an FIC by subscribing for shares, which they immediately give away to children or other family members. The value of the gift will fall out of the donor's estate for inheritance tax purposes, provided the donor survives the gift by at least seven years – but it's important to consider whether you are willing to relinquish control to the company's shareholders (ie, other family members).
Telegraph
a day ago
- Business
- Telegraph
Son wipes out inheritance and left owing £100k after 15-year family feud
A son has been hit with a £282,000 inheritance tax bill following a 15-year legal battle with his family. Sharas Changizi had been locked in a bitter dispute with his mother and three siblings since his father's death in 2010, according to court documents. His siblings had given away their shares of their father's estate to their mother in 2012 using a deed of variation, which allows beneficiaries to redistribute their parts of the estate. As the surviving spouse, Mrs Changizi was an exempt beneficiary – meaning her portion of the estate should have been free from inheritance tax. However, Mr Changizi refused to give his share to his mother and argued that inheritance tax should be charged on the estate as a whole, and not just on his share. The family paid the £282,000 inheritance tax bill, including interest, but insisted that Mr Changizi was actually liable for the costs. In a judgment reached in April 2025, the High Court held that the family's approach of charging the son's share with all of the inheritance tax was correct. Mr Changizi already owed the family £116,000 in court costs following years of bitter litigation, which included him trying, and failing, to challenge the validity of the will. Together, these court costs and the inheritance tax liability ate up Mr Changizi's £300,000 share of the estate and left him owing his family £102,000, court documents show. The case shines a light on the potential complications of splitting the estate between exempt beneficiaries – such as spouses and charities – and non-exempt beneficiaries. Claire Roberts, of accountants Moore Kingston Smith, said: 'It has long been understood that inheritance tax on a non-exempt share of an estate is paid from that share and that exempt beneficiaries receive their share in full. In this case, the appellant arguably tried his luck by suggesting otherwise.' Mr Changizi had also received a payment from his father a year before his death. Gifts made within seven years of a person's death are generally considered part of the estate for inheritance tax purposes. Mr Changizi had tried to argue that the inheritance tax charge on this gift should not be deducted from his share of the estate, but this was dismissed in court. Ms Roberts added: 'This serves as a cautionary reminder to testators to ensure that they understand the implications of making lifetime gifts in conjunction with the terms in their will.'
Daily Mail
a day ago
- Business
- Daily Mail
I'm giving my pension away to my daughters as surplus income to cut inheritance tax - here's how
Inheritance tax has become an even hotter topic in recent times when it comes to our personal finances and financial planning. With an increasing number of estates set to be dragged into the inheritance tax net in coming years, more people will need to take action to mitigate the eventual tax bill. One way to do this is to make use of gifting out of surplus income, officially known as 'normal expenditure out of income'. This useful exemption is becoming more popular with those looking to slash the IHT bill levied on their estates, especially as it means the money given away becomes free from IHT immediately, and is not subject to the seven year gifting rule that many are caught out by. Gifting out of surplus income allows you to pass on wealth free from tax provided that it forms part of a regular 'pattern of giving'. However, failing to properly record these regular gifts could see you fall foul the rules. As a result, it is important to ensure that the gifts come out of your income rather than capital, and form a regular pattern. Below, one This is Money reader, Dave Oram, 59, explains how he is using gifting out of surplus income to pass his wealth to his two daughters, and how you can do the same. 'Every pound I can pay my daughters legally now is going to be worth a pound rather than 60p,' Dave Oram says. 'I just want to pay as much money to them now so that I can help them and they have to pay less of it in tax to the Government.' The savvy 59-year-old plans to use gifting out of surplus income in order to pass his wealth on to his two daughters, both of whom have moved out of his home in south London. Oram previously worked in payment systems at NatWest, taking voluntary redundancy in 2021. When the Chancellor, Rachel Reeves, announced pensions would cease to be free from inheritance tax from 2027, Oram realised that his self-invested personal pension (Sipp) was at risk and that he might not be able to pass as much of his wealth to his children as he hoped. That was when he came across gifting out of surplus income, and discovered that it could be the perfect solution to help him secure his children's futures. 'I didn't set up a self-invested personal pension to avoid inheritance tax,' Oram said, 'I just got it in order to be able to retire earlier not pay the penalties for withdrawing my defined benefit pension early. 'Then my mum died, and I got an inheritance from her.' 'I've got a lot of money. I've got a lot of savings. Even before my mum died, I had a lot of savings and my house is worth a lot of money, so I knew I'd be hit for inheritance tax.' Having inherited money from his mother, Oram initially planned to leave his Sipp to his two daughters as a way to mitigate his future tax bill – a plan that was scuppered by the Autumn Budget changes. He said: 'I started looking into how I could avoid paying inheritance tax, and gifting. I was already using the £3,000 gifting allowance each year.' Oram added: 'I won't avoid inheritance tax, but I will at least mitigate it.' Oram told This is Money: 'The Government site is pretty poor on what counts as disposable income. 'There's no formula… it has to be regular payment. It cannot be the odd payment here and there. It has to be regular, which I've deemed to be monthly. Oram's plans are in place – upon drawing his defined benefit pension in May 2025, he has started to gift money to his daughters each month, satisfying the requirement for gifts to be regular and consistent, and also not hitting his standard of living. He said: 'It has to be regular outgoings, like utilities, food, those kinds of things. That's what I'm basing on. So I know how much I spend every year. I know what my pension income will be every year.' Oram plans to divide the money equally between his two daughters, 'I'm in a position where I have got a significant amount of savings. So I can give as much of my income as I can to my girls now, which is quite useful for them.' He told This is Money: 'I've explained to them that I can pay them money and that I'll be paying them an equal amount to go towards their rent.' 'They're just very happy that I can pay some money monthly.' Oram added: 'My youngest, who got married last year, is renting, and they want to buy. 'This will help them. I will be paying them quite a bit of money, which means I can just save that and put into their pot for deposit.' With pensions set to be drawn into the inheritance tax net, and the IHT threshold being frozen until 2030, an increasing number of people will start paying inheritance tax on their estates. Oram said: 'I'm totally against inheritance tax. I think it's wrong. I certainly I think it's wrong for everyone, even if you've got loads of assets and you're really super well off. I still think it's wrong, because if you've been paying your taxes, I don't see why on death you should have to pay in inheritance tax.' 'A lot of people think 'tax the wealthy', not realising that they'll probably be taxed as well, because most of them haven't got a clue how inheritance tax works.' He added: 'Their view is, 'it won't affect me', but it will affect them. Of course, those people are the ones who end up paying more because they're not going to mitigate it.' Inheritance tax receipts reached £8.2billion between April 2024 and March this year, another record high and an increase of £800million compared with the same period last year. Helen Morrissey, head of retirement analysis, Hargreaves Lansdown, said: 'A mixture of frozen tax thresholds and rising asset values drag more families into the net. 'The recent government announcement that pensions will be made subject to inheritance tax from April 2027 will act as a further warning to families that they need to be prepared.' What is gifting out of surplus income? Gifting out of surplus income, as mentioned above, allows you to pass on wealth without incurring a tax bill. To qualify for this, the gifts must form part of a 'pattern of giving' that can be backed up with records. Obviously, this pattern has to start somewhere, so a gift that proved to form part of a commitment to create a pattern also qualifies. Alongside this, these gifts must be from income that is surplus to your needs, this means that giving the gifts must not impact your standard of living in any way. Gifts must also be made from income, rather than capital – this means that savings and investments can't be the source of the funds gifted. However, there are other stipulations that you need to be aware of, so it is important to do your research before taking any action and it is advisable to speak to a qualified independent financial adviser.
Times
2 days ago
- Business
- Times
Farmer's nightmare as father ‘took own life over IHT changes'
It was early in the morning when Jonathan Charlesworth got a call from his uncle, who could not get hold of Charlesworth's father. The brothers had never missed their 7am virtual Scrabble match, but on October 29 last year, the retired farmer failed to log on. Charlesworth, 47, was not alarmed. He saw his children playing in the barn and almost called out to ask them to 'find Grandpa'. 'For some reason I didn't — and I'm so glad,' Charlesworth recalled. 'Instead, I walked around back and saw him hanging.' The day before Rachel Reeves was set to announce changes to inheritance tax for farmers in her autumn statement, John Charlesworth, who went by his middle name of Philip, took his own life. He died aged 78 where he had lived since age 11, on Bank House Farm in Silkstone, near Barnsley. He had inherited the land from his own father, also called John. The timing, his son had always maintained, 'was no coincidence' — a conclusion also drawn by a coroner last week who found that Charlesworth had killed himself while 'worried about implications of new regulations around inheritance tax '. The media had been briefed in the run-up to the budget that the chancellor was poised to announce a raid on landowners by restricting tax relief on agricultural and business property. However, the full details were only announced on October 30. 'There was so much talk about it, but no information anywhere,' Charlesworth explained. 'We didn't know when it would come in. We didn't know how much it would be. We didn't know what the threshold would be. I think every farmer was worried about it but my dad got really worried. It was all we talked about. 'He must have just wound himself up so much about it that the day before the budget, he took his own life. He had got in his head that if this is implemented, and it's in from tomorrow, we're stuffed. So he decided he was going to beat it.' Philip, who loved bell-ringing on a Sunday and teaching his grandchildren the tricks of the farming trade, had no known mental health problems, although he had struggled as the full-time carer for his wife, a former English teacher and lecturer, who was suffering from severe dementia and cancer. The father of two had left the family a short suicide note, underneath which he included some calculations related to the farm's finances. PA Sitting in the farmhouse kitchen, only metres from where he had found his father, Charlesworth said he spent weeks waiting to wake up from what felt like a nightmare. 'I blamed myself that I didn't see it coming, that I didn't talk him out of it,' he said. 'But he was very much like that, my dad. Once he had made a decision, he'd stick to it.' In the end, changes to inheritance tax relief were less drastic than the family had feared: farms worth less than £1 million were exempt and the tax rate above that was capped at 20 per cent, rather than the standard 40 per cent. Yet Charlesworth, who reared cattle and sheep on his 75-acre farm, still estimated that under the new rules, his family would be hit with a bill of up to £200,000. That was not money that Charlesworth, who estimated that he paid himself an hourly wage of about £5, could easily find. The farm had only stayed afloat since they opened a campsite during the pandemic. 'The average farm size will be three to four times ours and they will be hit really hard,' he said. 'Farmers feel persecuted,' Charlesworth added. 'There is an argument for inheritance tax on land because people are using it as a tax dodge but those people aren't farmers. For us, it's our factory floor. Those others will just put that money somewhere else, where it's more tax-efficient.' Charlesworth fears more suicides next March if the tax changes are not reversed MARK WAUGH/MANCHESTER PRESS PHOTOGRAPHY Any property passed on more than seven years before death falls outside the scope of inheritance tax. Charlesworth is calling on the government to 'at the very least' push back the implementation date of the new rules for landowners, to give farming families enough time to transfer their assets. Otherwise, he fears, others could come to the same terrible conclusion as his father. Darren Millar, leader of the Welsh Conservatives, described the case of one farmer who died after declining cancer treatment as he was 'so concerned about the implications of the inheritance tax changes' that he wanted to ensure he passed on his land before they came into effect next April. 'If you've got farmers in their eighties [or] nineties, or farmers with health problems who aren't sure if they are going to live another five years, they might think they can't risk it,' Charlesworth said. 'If Labour don't push the date back, March next year will be like National Suicide Month.'
