Latest news with #inheritanceTax
Yahoo
3 days ago
- Business
- Yahoo
Farmers turn land into cemetery to raise cash
A family farm has transformed a spring barley field into a natural burial ground in an unusual attempt to raise cash. Clair Goodson, 54, warned that farms such as hers were 'up against it' following Labour's inheritance tax raid in Rachel Reeves's October Budget. As farmers are being encouraged to diversify their businesses to create sources of income, many have turned to letting out buildings, selling produce or providing holiday accommodation. However, Mrs Goodson, who runs Castle View Farm in Bottesford, Leicestershire, with her husband James, has instead turned a previously 'unproductive' plot of land into a potential gold mine. The 10-acre field has capacity for 7,500 burial spots in a tranquil setting which overlooks the Vale of Belvoir, Belvoir Castle and Lincoln. A delegated space will set families back either £500 for an ashes plot or £1,400 for a full burial – both of which Mrs Goodson pointed out were 'quite a bit cheaper' than traditional alternatives. The burial site does not feature traditional gravestones, but instead wooden plaques mark the area and are placed level with the ground. The Goodsons hope the field will offer a financial boost at a time when farms across the country are struggling. 'Farms have all got to diversify because it's not what it used to be,' she told The Telegraph. 'Farming is really tough at the moment, we are up against it all the time. [What] with the Government, the weather and prices, diversification is more important than ever.' Although their burial grounds have now been open for three years, Mrs Goodson said she was 'glad we did what we did' when they did it, ahead of the Chancellor's autumn Budget. Filled with wildflowers and 'wonderful views of the countryside', the idea to diversify was drawn up by their daughter Emily. The field's heavy clay was not suited to growing crops and has so far proven more suitable to its new use after they gained planning permission. 'It is just an easier way of bringing income from a field,' she said. 'It wasn't a particularly productive field and we just thought we would do something completely different here. We knew the views were wonderful up here and we thought a burial ground would be lovely – wonderful views was the main thing.' While it was hard raising awareness and advertising at first, Mrs Goodson said they are now up to plot 50. 'It's been a steady, slow burn. But now I've heard people in the local pub saying 'I'm going to be buried there',' she said. The land is often teeming with wildlife, including skylarks, hares and even English partridge. Mrs Goodson said: 'It's just a really peaceful place to come and reflect and visit their loved ones.' They have also had others who have left it in their will to be buried in the grounds. Mrs Goodson said their current set-up had made the area more biodiverse than if it were just being used for crops. When the 93 trees they have planted are fully grown, they also plan to install bat and owl boxes. They have already diversified the rest of their 330-acre arable farm with a livery yard of nine stables. The burial ground was more unusual, as some locals were originally sceptical at first, she said. 'We've still got lots of space, although I'm not sure we'll need it in my lifetime unless there's some sort of disaster,' she joked.
Telegraph
4 days ago
- Business
- Telegraph
Farmers turn land into ‘natural cemetery' to raise cash
A family farm has transformed a spring barley field into a natural burial ground in an unusual bid to raise cash. Clair Goodson, 54, warned that farms such as hers were 'up against it' following Labour's inheritance tax raid in Rachel Reeves's October Budget. As farmers are being encouraged to diversify their businesses to create sources of income, many have turned to letting out buildings, selling produce or providing holiday accommodation. However Mrs Goodson, who runs Castle View Farm in Bottesford, Leicestershire, with her husband James, has instead turned a previously 'unproductive' plot of land into a potential gold mine. The 10-acre field has capacity for 7,500 burial spots in a tranquil setting which overlooks the Vale of Belvoir, Belvoir Castle and Lincoln. A delegated space will set families back either £500 for an ashes plot or £1,400 for a full burial – both of which Mrs Goodson pointed out were 'quite a bit cheaper' than traditional alternatives. The burial site does not feature traditional gravestones, but instead wooden plaques mark the area and are placed level with the ground. The Goodsons hope the field will offer a financial boost at a time when farms across the country are struggling. 'Farms have all got to diversify because it's not what it used to be,' she told the Telegraph. 'Farming is really tough at the moment, we are up against it all the time. [What] with the Government, the weather and prices; diversification is more important than ever.' Although their burial grounds have now been open for three years, Mrs Goodson said she was 'glad we did what we did' when they did it, ahead of the Chancellor's autumn Budget. Filled with wildflowers and 'wonderful views of the countryside', the idea to diversify was drawn up by their daughter Emily. The field's heavy clay was not suited to growing crops and has so far proven more suitable to its new use after they gained planning permission. 'It is just an easier way of bringing income from a field,' she said. 'It wasn't a particularly productive field and we just thought we would do something completely different here. We knew the views were wonderful up here and we thought a burial ground would be lovely – wonderful views was the main thing.' While it was hard raising awareness and advertising at first, Mrs Goodson said they are now up to plot 50. 'It's been a steady, slow burn. But now I've heard people in the local pub saying 'I'm going to be buried there'', she said. The land is often teeming with wildlife including skylarks, hares and even English partridge and Mrs Goodson said: 'It's just a really peaceful place to come and reflect and visit their loved ones.' They have also had others who have left it in their will to be buried in the grounds. Mrs Goodson said their current set up had made the area more biodiverse than if it were just being used for crops. When the 93 trees they have planted are fully grown they also plan to install bat and owl boxes. They have already diversified the rest of their 330-acre arable farm with a livery yard of nine stables. The burial ground was more unusual, as some locals were originally sceptical at first, she said. 'We've still got lots of space although I'm not sure we'll need it in my lifetime unless there's some sort of disaster,' she joked.
Telegraph
10-07-2025
- Business
- Telegraph
How savers are protecting their pensions from Labour's inheritance tax grab
Since 2015, private pensions have been a sensible way to get around Britain's most hated tax. During his time as chancellor, George Osborne, guided by 'the fundamental Conservative principle that people who have worked hard and saved hard all their lives should be trusted with their own money', decided that retirees should be able to pass on unspent pension pots without their descendants incurring inheritance tax. But, if Labour's plans come to pass, this will soon no longer be the case. In her first Budget as Labour Chancellor, Rachel Reeves undid some of these freedoms by announcing her intention to bring pension pots into scope for inheritance tax. Though yet to become law, the proposals have nonetheless thrown a spanner in the works for many savers and financial planners, whose carefully planned retirements must now account for their pensions being fair game for the taxman. HMRC and the Treasury have been silent since the consultation into the change closed in January. According to Rachel Vahey, of stockbroker AJ Bell, pensioners are already patting for parachutes. 'While we wait to see the Government's next move, the pensions market is already starting to factor in the proposed changes,' she says. 'Over half of advisers are seeing new clients approach them for help with estate planning, including measures such as withdrawing money to spend, sheltering funds from inheritance tax or giving money to loved ones.' While some pension savers are seeking to spend their cash as quickly as possible, most are seeking more sensible ways to mitigate the new rules. For David Hobbs, 56, a former wealth manager from south London, Labour's planned tax raid on pensions undoes the more progressive policies of past Tory governments. 'It was great that Jeremy Hunt got rid of the lifetime allowance,' he says. 'By bringing pensions into inheritance tax, they've effectively taken that giveaway.' Though he is a decade away from retirement, Hobbs does not have much time to recalibrate his savings to account for such a significant shift in tax policy – and he's now busy planning what to do for the best. 'As I come to stop working, my ability to change my financial outcome is limited,' he says. 'The point I go from accumulating to 'decumulating' is fixed.' In the last year, Hobbs has thought about how to pass on more money to his children. 'I'm not against paying tax, but the fact is you ultimately build a set of plans and you make assessments based on your understanding of the tax rules as they apply,' he says. 'From a financial planning point of view, you'd have looked to use your pension last, but this reverses the whole thing so you're incentivised to spend as much as you can.' 'I think it's grossly unfair' Effects of the forthcoming changes could be compounded by those who already changed their pension plans as a result of Mr Osborne's pension freedoms, which allowed retirees to access their savings early. This prompted many to plough money into private pensions, ditching annuities. Research by the Pensions Policy Institute found that the number of annuity sales plummeted after the former chancellor's initial announcement. Their lack of flexibility and historically poor rates meant annuities continued to fall out of favour in the following years. Sir Steve Webb, the former pensions minister, said: 'More recent figures show some recovery, but sales of annuities are still way down. This means that, instead, more people have either cashed out their pension pot in full at retirement – usually for smaller pots – or kept them invested in a 'drawdown' account.' But Ms Reeves's announcement has moved the goalposts yet again – and annuities could be worth considering. 'The main thing which has changed recently is that the proposed inclusion of pensions in inheritance tax may lead to some flow of money out of defined contribution pensions, including possibly some people buying annuities to help avoid inheritance tax,' says Sir Steve. Buying an annuity gives you a guaranteed income for life. There are lots of different types, but if you buy one for you and your spouse, for example, the money is not held as part of your estate, and when you die the money will still be paid to them – subject only to income tax. However, the rate you get will depend on a lot of factors, including your age and any health conditions. It's one option that savers like Hobbs might consider. Wealth management firms such as Quilter are also advising clients to look at other options, such as strategic gifts, using trusts, or considering investment bonds wrapped in trusts, as investment growth steadily pushes the value of estates higher over time. Rachael Griffin, of Quilter, says: 'Many more estates are set to become liable for inheritance tax as pension wealth is brought into scope from 2027. 'But to add fuel to the fire, the frozen residential nil-rate band will compound the problem for families with estates nudging over £2m, where that valuable allowance starts to taper away. 'For those with significant property and pension wealth, it could mean a much bigger tax bill than expected.' But for those already in retirement like Barry Davis, 72, changing the structure of their pension savings is far more difficult – and he feels it's too late to make a difference now. 'It made more sense to do income drawdown – and it was a decision that was irreversible,' Davis says. 'Nine years later, they announced that pensions would be subject to inheritance tax. To buy an annuity now, I would have to take the money out and pay tax on it. It's a retrospective change in law, and I don't think they should apply it when people have made irrevocable decisions.' Davis has roughly £1.3m saved in his pension, and he estimates Labour's tax raid will increase his inheritance tax liability to £500,000. 'Worse than that, if I die and that £1.3m is still there, the people I leave money to pay 45pc [income] tax when they take it out, on top of the inheritance tax. I think it's grossly unfair.' 'We give our children regular gifts of £3,000 a year' The most common way to avoid the spectre of the taxman is to make regular gifts out of disposable income. Provided the amount you give does not negatively impact your standard of living, the money will not incur inheritance tax. A Telegraph reader, who asked to remain anonymous, is doing exactly this. 'We give our children £3,000 a year each, and when they buy a house, we will take some money out of our Isas, not our pensions,' he says. The 60-year-old and his wife have been self-employed for 20 years, and have for decades prioritised saving into their Sipps, funnelling money from their Isas into their pensions as a direct response to Osborne's pension freedoms. Making regular gifts is the way they're choosing to reorganise their finances, but it's not without risks – not least the chance you'll fall short if faced with the eye-watering cost of care in later life. 'If my wife gets dementia, or I do, or both of us do, then our children have power of attorney and they will spend everything we've got looking after both of us,' says the reader. An HM Treasury spokesman said: 'We continue to incentivise pension savings for their intended purpose – of funding retirement, instead of them being openly used as a vehicle to transfer wealth – and more than 90pc of estates each year will continue to pay no inheritance tax after these and other changes.'
Daily Mail
10-07-2025
- Business
- Daily Mail
How to work out and pay inheritance tax: You get just SIX MONTHS to stump up death duties
The daunting task of working out and paying inheritance tax must be done in the immediate and intense period of grief after a death. Although the vast majority of estates aren't liable for inheritance tax, the number of families grappling with it is bound to rise in coming years due to frozen thresholds, high property prices and pending pension changes. Inheritance tax is levied at 40 per cent on estates above a certain size. Estates passing to a surviving spouse or civil partner are exempt, so for many families it is when the second parent dies that they must work out and declare if any tax is due. Even when an estate is not large enough to pay death duties, the deceased person's finances still need to be gone through and often information must be submitted to the taxman anyway. If an estate is complex, or it feels too overwhelming to handle, those responsible for winding it up should find a lawyer qualified in this area to help calculate the IHT and deal with other financial affairs. But if you do get legal help, it is still important to know what your lawyer will be doing on your behalf and the details you will need to provide along the way. Here's our step by step guide to sorting out inheritance tax after a bereavement. 1. How long do you have to pay inheritance tax You get just six months, kicking off from the last day of the month after a loved one's death, to add up their assets, calculate what is owed and hand over any money due to the taxman. If no money is due, you get 12 months leeway to simply fill in the forms to show nothing is owed. But you will need to settle this issue one way or another with HMRC, if you need to get probate to gain control of the deceased person's funds - it won't be granted without the taxman's official sign-off. Bear in mind though that just because you have probate that doesn't mean HMRC is necessarily satisfied. It can still raise an enquiry at a later date or query a valuation. Also, note here the very important point that the IHT bill has to be paid upfront by the executor or administrator when they haven't yet got access to the assets in the estate via probate. Suddenly scraping up this money can be challenging for people who don't have funds ready to hand, even though they will ultimately be paid back out of the deceased's assets. Those who can't afford it do have options which will be explained below. Inheritance tax experts Thanks to the following money and legal experts who assisted with this guide. Heather Rogers, This is Money's tax expert and the founder of Aston Accountancy Shaun Moore, tax and financial planning expert at Quilter Jade Gani, director of the Association of Lifetime Lawyers and chief executive of Circe Law NFU Mutual, the financial advisory firm 2. Do you need to pay inheritance tax 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 beneficiaries 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 autumn Budget these thresholds will be frozen until 2030. She also announced that inheritance tax is going to be levied on unused pension pots starting in spring 2027, as it is now on other assets such as property, savings and investments. This is Money's tax expert and the founder of Aston Accountancy, Heather Rogers, notes that sometimes the full NRB is not passed to a surviving spouse on death, because the first spouse who died did not leave their entire estate to them. She says the full RNRB may also not be available for offset, depending on the value of the property and other factors - for example, there are special rules if you have sold your home to pay care fees. Trusts can also add complexity, adds Rogers. > 10 ways to avoid inheritance tax legally 3. Do you need to fill in IHT forms This can be a minefield. IHT forms sometimes need to be completed to prove an estate doesn't owe any money to the taxman, not just when there is a bill to pay. explains when to send full details of an estate even when no tax is due here. Most estates are 'excepted estates', in which case you do not have to give full details of the value. But take care over this because if you do not submit an IHT400 form when it is required you can face penalties, which are explained below. 'The complexity lies in determining whether the estate qualifies as excepted,' says Shaun Moore, tax and financial planning expert at Quilter. 'If it does, the process is simpler and you can usually proceed with probate without submitting detailed tax forms. If it does not, then full disclosure is required, even if no tax is ultimately payable. 'Fortunately, following a review by the Office of Tax Simplification in 2021 the government announced the reduction in reporting requirements for inheritance tax with an anticipated 90 per cent of non-tax paying estates avoiding mandatory reports. 'However, some still do need to report so checking is crucial.' Moore provides the following examples where form filling can still be required. If the deceased: - Gave away more than £250,000 in the seven years before death - Continued to benefit from gifts they had made - Left an estate worth more than £3million - Held foreign assets worth over £100,000 - Previously lived in the UK but died while living abroad - Had a life insurance policy that paid out to someone other than a spouse or civil partner alongside an annuity - Increased the value of a pension lump sum while terminally ill - Agreed property they had given away would remain part of their estate rather than pay a pre-owned asset charge - Had made gifts into trust or held an interest in a trust worth more than £250,000, or held an interest in more than one trust. - Had put assets in a trust which passed to a surviving spouse, civil partner or charity and was worth £1million or more, or £250,000 or more after deducting the value of the exempt transfer. > How does probate work? Dealing with someone's estate 4. Which forms do you need to fill in and where do you find them The Government has a scarily long list of inheritance tax forms here. However, the ones you are most likely to need are below. You should seek professional help if you struggle to fill them in, or the estate is complicated. 'Understanding which forms to complete is one of the first hurdles for families dealing with inheritance tax,' says Shaun Moore of Quilter. 'It's important to check carefully which ones apply, as they can be detailed and time-consuming.' Inheritance tax forms IHT400 - If inheritance tax is due, or a full account is due - perhaps because you need to claim the Residence Nil Rate Band. There can be extra pages, called 'schedules' depending on what is in the estate. IHT403 gifts and other transfers IHT404 for jointly owned property IHT405 for homes or land IHT406 for bank accounts IHT407 for household items like furniture or jewellery IHT418 for trusts or large lifetime gifts If the date of death was on or before 31 December 2021 IHT205 - If the death occurred before this date but it is unlikely any IHT is due, you might be required to complete this form. As explained above, applying for probate is an important step to gain control over an estate after someone dies, allowing executors to access bank accounts, settle debts and sort out bequests. But you usually need to have paid any inheritance tax owed before probate is granted, unless you are paying the tax in instalments - more on this below. You will need to get an IHT reference number from HMRC at least three weeks before paying any tax. After paying, you will have to wait for HMRC to send you a unique code confirming you've paid it, which allows you to obtain probate. You will usually get this code within 20 working days of HMRC receiving your IHT400 form or inheritance tax payment, whichever is later. Probate forms PA1P - To apply for probate if the person who died left a will PA1A - To apply for probate if there was no will 5. Who is responsible for filling in the forms If there is a will, the executor - there might be just one, or sometimes more - has to take on this task. If there was no will, someone can step up and apply to be the administrator of the estate instead. Whoever does this is usually a close family member and/or someone who will inherit under the intestacy rules. If there is no one, a qualified professional like a lawyer will be appointed, and their fees are paid out of the estate. The executor and administrator are sometime referred to in legal jargon as the 'personal representative'. Heather Rogers of Aston Accountancy says these people are responsible for sorting out the estate and completing inheritance tax forms, but they can delegate this work to a solicitor. Again, the fees are charged to the estate. 'This is recommended for complex estates and in my view absolutely mandatory if you have contentious probate – this is where someone challenges the will,' says Rogers. 'You can get into all sorts of legal issues handing those yourself due to the impartiality requirements.' Other than dealing with inheritance tax, personal representatives have to do everything else involved in winding up an estate, like applying for probate and distributing the assets to the beneficiaries. If you are named in a will as an executor but don't want to do it, you can officially relinquish the job - but only if you have not already started carrying out the duties. 6. What information will you need to gather You need to gain a full and accurate picture of the deceased's finances on the date they died. That means chasing up all bank statements and other accounts of their assets, like investments and pensions, and getting property valuations. This can be slow and tedious work, and you might have to chase some finance firms hard for the information. You can ask for compensation if they let you down - former judge Stephen Gold won hundreds of pounds more for his late aunt's estate from bungling banks and businesses this way. You also need to find out what gifts the deceased made in the last seven years before they died, which can be tricky if this was done haphazardly and no records were kept. Keep documents for everything you find out, because HMRC can and may very well ask questions about the figures. has a guide to how to value an estate for inheritance tax here. 7. What assets do you need to declare to the taxman Everything that is owned, either in the person's sole name or jointly, has to be included on the IHT form. Shaun Moore of Quilter says: 'That includes property, bank accounts, shares, valuable possessions like jewellery or art, and life insurance policies if they weren't written in trust. Gifts made in the seven years before death must also be included.' Heather Rogers of Aston Accountancy says if an asset like a family home is going to pass to a beneficiary and not be sold, it is important to get a surveyor to prepare a proper report on how much the property is worth. 'I speak from personal experience on this, as HMRC enquired into my father's estate due to the value placed on the house,' she says. 'Fortunately, I had the surveyor's report and the District Valuer accepted it, after a visit to the property. HMRC then had to accept it too. 'This is another area where people make errors and skip steps and pay the price when an enquiry is opened.' Rogers also cautions: 'Foreign assets can be left off either intentionally or innocently but they are also usually picked up by HMRC at some point due to the information sharing between countries.' 8. Should you get an accountant to help you Inheritance tax is normally handled by a solicitor if you get one to help you sort out an estate. However there are several important, related tax jobs where an accountant might be needed, and which are often overlooked. 1. A tax return for the deceased for the tax year up to the point of their death. 2. An estate tax return covering the period when the estate is being administered, from death until when it is finalised - if you have a solicitor, they will normally hire an accountant to do this and it is included in their service. 3. A calculation of capital gains tax if a property is later sold for a higher value than was declared at probate (see the link below for a detailed explanation of this little-known tax trap). Regarding the period of administration of the estate, Rogers says: 'A letter to HMRC will suffice if it is a simple estate. 'Any estate paying inheritance tax will most likely have to do these returns. Income tax and possibly CGT will be payable during this period and it ends when the assets are distributed. 'The liabilities are paid from the estate and for any income arising on the beneficiaries a tax credit will be available for that paid by the estate.' Complex estates have to be registered with the Trust Registration Service if any of the following apply: - The estate is worth more than £2.5million - Income tax and/or capital gains tax during period of administration will exceed £10,000 - Assets of more than £500,000 are sold in any one tax year forming part of the period of administration > Do I have to pay CGT because I mistakenly undervalued a house for probate? Getting a valuation: If a family home is going to pass to a beneficiary and not sold, it is important to get a surveyor to prepare a proper report - as HMRC may dispute your figure 9. What if you can't afford to pay inheritance tax upfront Many people worry that a large inheritance will be a burden rather than a boon, when they learn they must hand over potentially gargantuan sums to the taxman before seeing a penny. It is common for beneficiaries to not have the ready cash to pay inheritance tax bills. But you do not have to be rich already to receive a substantial inheritance, and you will not be beggared by the experience. Heather Rogers explains the usual ways around the problem of paying inheritance tax within six months of a death, and before you can access the estate. The Direct Payment Scheme: Use cash in the deceased person's bank accounts, NS&I accounts and sometimes investment portfolios too to pay HMRC direct. Details of the Direct Payment Scheme are here. Pay in instalments: If the estate is tied up in non-cash assets, for example property, shares, or a business, you can spread payments to the taxman in 10 equal instalments over up to 10 years. But on top you will need to pay a variable rate of interest, which is set at the Bank of England base rate plus 4 per cent at the time of each instalment. The base rate is currently 4.25 per cent, so the interest rate is 8.25 per cent right now. You can pay the bill off in full at any time to stop paying the interest. But people often choose to pay by instalments so they can afford to keep the family home, or if it is taking a very long time to sell the property. Borrow to cover the bill: Take out a commercial bridging loan using assets in the estate as collateral. Or, apply for a Grant on Credit from HMRC to postpone paying IHT until the assets are sold. Interest is charged in either case. Take out insurance: If the deceased has planned in advance, they can take out life insurance and put it in trust, so it isn't in the estate for IHT purposes. You can appoint one or more beneficiaries of the trust, who will be paid the full sum due when you die. And you can insure your life for the sum you think your beneficiaries will have to fork out in inheritance tax, to offset their liability. However, premiums can be high, especially as you get older, and if you cancel a policy you immediately lose all the benefits of taking it out in the first place. Divert some of the estate to charity: IHT is reduced from 40 per cent to 36 per cent if at least 10 per cent of an estate was left to charity. If it wasn't, beneficiaries of a will can still redirect some of their inheritance to charity via a 'deed of variation' to cut their IHT bill. > How to avoid IHT on life insurance by putting it in trust > How does a deed of variation work 10. What if you miss deadline for paying IHT or submitting forms If you are the personal representative - the executor or administrator of an estate - you have six months from the end of the month after the date of death to pay an inheritance tax bill. For example, if someone died on 15 January, IHT is due by 31 July. If you are late, you will be charged interest on the unpaid tax - it is currently 8.25 per cent a year. This interest rate applies even if you've arranged to pay in instalments. Meanwhile, you have 12 months to submit IHT forms. You might want to take this extra time if no IHT is owed, but you do need to apply for probate to get access to an estate, and have to get HMRC's sign-off to do so. There are penalties for late filing of the IHT400 form, separate from interest and based on how late it is submitted. - Up to 6 months late: £100 -Six to 12 months late: Additional penalty of £200 - More than 12 months late: Up to £3,200 These penalties are subject to appeal if you have a reasonable excuse. 11. What about other penalties for making errors, missing off assets or evasion 'A favourite enquiry area for HMRC is estates, particularly property valuations,' warns Heather Rogers of Aston Accountancy. 'If you get the wrong valuation, or HMRC disagrees with your valuation, then expect a visit from the District Valuer.' She says if an asset is being sold it is less of a worry as the amount it fetches will be the value for the final inheritance tax account. But if an asset like a property is going to be passed to a beneficiary, you should get a valuation by a surveyor. Rogers says the level of penalty you might face depends on the circumstances, but can be severe. Here is a rundown. - Reasonable care has been taken - Up to 30 per cent of the IHT bill, but this let-out will not apply if a professional valuation hasn't been obtained for a property or other valuable assets. - Assets have been deliberately omitted from an IHT return – up to 70 per cent of the bill. - Hiding a deliberate error – up to 100 per cent of the bill. You might also face contempt of court for signing a misleading legal statement. How HMRC combats tax evasion and what penalties you face > What to do in a dispute with the taxman Jade Gani: If your submitted values were inaccurate, a corrective account can be filed later 12. What if asset values change - can you make amendments You should be prepared to submit at least one 'corrective account', says Rogers. She explains this is because IHT has to be paid before the grant of probate is issued, so assets will probably be sold for a different amount later. 'If the asset is land or property and is sold at a loss then the claim for a repayment of IHT must be made within four years of death. For shares it is one year.' You need the form IHT38 for losses on land and buildings and IHT35 for losses on shares. Jade Gani, director of the Association of Lifetime Lawyers, says: 'Asset values can fluctuate. HMRC assesses IHT based on values at the date of death. 'If your submitted values were inaccurate, a corrective account can be filed later but must be done before finalising the estate.' Gani adds that common errors people make with inheritance tax include failing to correctly value joint assets, undervaluing assets in general, and ignoring gifts made in the seven years before death.
Daily Mail
10-07-2025
- Business
- Daily Mail
Can we put our children on our properties' deeds to avoid inheritance tax?
We are a retired couple and have two adult children, aged 45 and 30. Our home is worth around £350,000 and we also have a buy-to-let property valued at £250,000. Both are owned in our joint names as tenants in common. We also have investments worth £150,000. We wish to pass on the two properties to our children, giving them one each. We intend to do this by adding their name to each respective title deed as joint owners with us. When we both pass on, will our children be subjected to inheritance tax? U.P Harvey Dorset of This is Money replies: An increasing number of people are being dragged into paying inheritance tax as the allowance remains frozen and house prices gradually rise. Now, with pensions set to be included in IHT calculations from 2027, this will pull even more estates into the net. At the moment, your estate is not of the size that will make it liable for an inheritance tax charge - provided you are able to use your full allowances and also spousal transfer. This would mean you and your husband could, collectively, transfer up to £1million to your children tax-free. As discussed below, however, upcoming changes could affect this depending on the size of your pensions - and if they take you over that £1million mark. In your case, with an estate worth £750,000, your pensions would have to be worth more than £250,000 combined for this to happen. But avoiding this also isn't as simple as you placing your children's names on the title deeds of your properties. In fact, your situation could prove problematic further down the line if you don't handle it properly. To find out what you need to do to ensure your children aren't stung with inheritance tax, This is Money spoke to a financial adviser and solicitor, who share their responses below. Tom Garsed-Bennet, independent financial adviser at Flying Colours, replies: This is a common concern for our clients. Assuming you have no other assets, there is no IHT liability as your estate is valued at under £1million. However, if you have defined contribution or personal pensions, these will become part of your estate from 6 April 2027 and could tip it into IHT territory. As it stands, there appears to be no IHT benefit in adding your children's names to the property titles. It could even be a hinderance for tax planning if they were. This is because adding children to their parents' main residence property deed could trigger a 'gift with reservation of benefit' situation. In this case, His Majesty's Revenue and Customs could still treat the 'gift' - in this case a share of your home - as part of your estate, as you were still using it at no cost. The child who received a share of your main home would also be liable for capital gains tax on any gain in value on their share, as it would effectively be a second home. If you and your husband to retain your main residence in your names only, it would not be subject to CGT. The child that was put on the deeds of the buy-to-let property would be entitled to a proportion of the rental income as part-owner. They would also be subject to capital gains tax once the property was sold. If there is any concern around residential care fees eating into your estate in future, then a property protection trust might be a good option for you. This allows the 50 per cent share of the property to move into a trust on first death (of either yourself or your spouse). The remaining spouse can continue living in the property or move house (as they have a lifetime interest), but they only own 50 per cent themselves. This is normally written into your will and only becomes effective on the first death. This approach means that should the remaining spouse need residential care in future, only their half of the house can be accessed to pay for their care. The other half of the house is ring-fenced within a trust for the beneficiaries - your children in this case. I would always advise you to seek independent professional advice to guide you through this process, however, as IHT is a notoriously complex area. Help with financial advice and planning Financial planning can help you grow your wealth, sort your pension, or make sure your finances are as tax efficient as possible. A key driver for many people is investing for or in retirement and inheritance tax planning. If you are looking for help sorting your finances and want to work out whether you need advice, planning, or coaching, the following links can help you understand more: >Do you need financial planning or financial advice - and is it worth it? > Financial advice: What to ask and how much it might cost > Are you retirement ready? Take our quiz and get financial planning help > Inheritance tax planning - what you need to know to protect your wealth Joshua Ryan, principal associate at Weightmans LLP, replies: With tax and estate planning, the starting point is to take a step back to assess your assets holistically. This tends to lead to more planning options. The combined value of your estates is £750,000. Each individual has an inheritance tax-free allowance, which is known as the nil rate band. This allowance is currently set at £325,000, but is reduced by gifts made in the seven years prior to your death. Equally, if you leave residential property to a child or grandchild, and the value of your estate is beneath £2million, you can claim an additional allowance called the residence nil rate band allowance, which is valued at £175,000. The total value of both allowances is £500,000 per person, or £1million for a couple. Circling back, it would seem as though the value of your estates is within your available allowances and so you are not presently exposed to inheritance tax. Aside from preparing a tax-efficient will to ensure that the above allowances are retained in full, the best planning strategy would be to do nothing, for now, and to keep an eye on the value of your estates. With this being said, if the value of your estate exceeds the available inheritance tax-free threshold, you might want to take steps to reduce the size of your estate to reduce the inheritance tax payable on your deaths. This should be guided by professional tax and legal advice. There are many anti-avoidance rules and requirements that need to be carried out, and failure to follow these rules not only leads to unnecessary costs but also in many cases significantly increases the tax liability payable on your death. Key points to note when dealing with properties are as follows: 1. The UK has a principle that you cannot retain a benefit from an item gifted – this is known as the gift with reservation of benefit rule, and it means if you give something away you cannot continue to benefit from it. Therefore, simply adding your children's name to the title deeds will not work – you have not given the asset away, and so you will be liable to inheritance tax on the property. 2. Equally, certain allowances such as the residence nil rate band allowance rely on you owning your home or the proceeds of your home on death. If you gift your home then you do not own it – this reduces your available allowances, and I have seen many a case where inheritance tax is due as a result of the lost allowances. 3. There are steps that you can take to gift a share of the property to your children – but this planning is not straightforward, and needs careful consideration. There is more than one way to do this too: you can gift and rent back, you can gift a part of the property, or you can move your children in with you and gift. Each one has strict requirements so you need to ensure you abide by these, and to take professional tax and legal advice. 4. Finally, when gifting properties that are not your home then you risk generating a capital gains tax liability. The current capital gains tax rate is 24 per cent on the gain made. Equally, if you gift the property and do not reserve a benefit from it, then the value of the gift is classified as a potentially exempt transfer. You need to survive the date of the gift by seven years to avoid the value being amalgamated with the value of your estate on death. The worst case scenario is that you pay 24 per cent capital gains tax on the gain made by the property, and then 40 per cent inheritance tax on the value of the gift. In summary, there are options but these should be guided by professional tax and legal advice from a solicitor that advises on inheritance tax mitigation.
