Latest news with #inheritancetax
Daily Mail
a day ago
- Business
- Daily Mail
Can we gift our daughter three of the bedrooms in our house to lower inheritance tax bill?
Inheritance tax is a minefield for us. We do not want to leave our daughter with a big tax bill after we die, but our house may be worth £1million in 20 years. We have been advised to make a trust under Section 102. We've also been told to give our daughter three of our bedrooms, then if the last person survives seven years the house will not be included in IHT. This is because it will already be registered with the Government, and she will only have to deal with probate on the remaining funds. The cost would be north of £5,000. I'm not clued up about this, so can this be set up so that the last person to die be after seven years? For example, I could die tomorrow but my wife could live over seven years. Any advice welcome. Angharad Carrick of This Is Money says: Inheritance tax (IHT) is a thorny issue and I understand why you and your wife do not want to leave your daughter with a huge tax bill. Frozen thresholds combined with rising asset prices, including the value of homes, investments and savings, are already dragging more people into the IHT net. IHT is levied at 40 per cent on estates above a certain size. As an individual, your estate needs to be worth more than £325,000 for your loved ones to have to pay IHT. This can be doubled to £650,000, jointly, for married couples or civil partners, who have not already used up any of their individual allowances. A further crucial allowance, the residence nil rate band, increases the threshold by £175,000 each for those who leave their home to direct descendants. This gives a total potential extra boost of £350,000 and creates a potential maximum joint inheritance tax-free total of £1million. Changes to the rules in 2027 will also bring pension pots into people's estates, which will only add to the numbers due to pay death duties. This Is Money recently revealed how this change will add thousands to some families' tax bill. There are several ways to mitigate the tax's impact, but the rules are complex. We asked some tax experts for some general thoughts on using a trust for IHT and whether it's possible to gift your daughter part of your property. What is a trust for IHT purposes? Natalie Butt, Director, Private Clients at Crowe, says: A trust is a mechanism whereby an individual can move assets out of their estate. To get relief from IHT, an individual would need to a) give the asset away and retain no benefit, and b) survive 7 years from the gift. When an individual gifts any asset into a Trust, this is a lifetime chargeable transfer and is subject to an immediate charge to IHT – on the basis that the individual has not settled Trusts in the preceding 7 years, they would have the first £325,000 at 0 per cent and the balance above at 20 per cent. Generally, if the settlor survives for 7 years after making a gift to a Trust and has no benefit, it will fall outside of their estate. Trusts come with both legal and taxation reporting requirements, including registration on the Trust registration service, which is managed by HMRC. Trusts are often irrevocable and should not be entered into without due care and attention. For IHT purposes, when a married couple, or couple in a civil partnership, put assets jointly into a Trust, they are deemed to have both made the gift on the percentage of what they bring to the table. For example, if a rental property was owned tenants in common with a 60/40 split, then the total value would be apportioned. If one of the couple were to die within the 7 years, then their gift will fall back into their estate. Can I gift bedrooms to lower the tax bill? Rachael Griffin, tax and financial planning expert at Quilter says: At the heart of this is a concept known as the 'seven-year rule'. If you give something away like a share in your property, and survive for seven years, then that gift is generally outside your estate for IHT purposes. But there's a key catch you can't still benefit from what you've given away. This is known as a 'gift with reservation of benefit' (GWR), and it means if you keep living in the house rent-free after giving it away, HMRC will treat it as still being part of your estate, and tax it accordingly. That's where Section 102 of the Finance Act 1986 comes in. It outlines the GWR rules and is designed to stop people dodging IHT while continuing to enjoy the benefit of the gifted asset. Simply giving your daughter three bedrooms, while you and your wife carry on living in the house, would fall foul of these rules even if one of you survives another seven years. Some people try to mitigate this by paying market rent to the person they've gifted the house to but that's often impractical, especially when the beneficiary is a close family member like a child. HMRC expects it to be properly documented and paid consistently. Butt says: It is very difficult to give away your family home and continue to live there. One option an individual may consider to help ease the impact of IHT is to take out a life assurance insure the tax. This policy could be written into Trust and be accessible straight away on death. It should be outside the scope of IHT and enable the beneficiaries to pay the tax. If that is not an option due to age, some individuals are considering lifetime mortgages and using the cash borrowed against the property to gift to children. The alternative is for the parents to pay market rate rent to their children for the gift to be IHT effective. This technique though depletes cash savings and means the children have a reporting obligation to HMRC for the rent received and creates an income tax charge for them, so this is probably seen as a last resort. It would be advisable for individuals considering their options to seek professional advice. Please note, we cannot give tax advice in isolation – we need to know the full picture of any clients' needs. However, we can provide general pointers that should not be relied on. Is there anything I can do to lower the IHT bill? Griffin says: The good news is that if your daughter is your direct descendant and the house is your main residence, then each of you currently has a £175,000 residence nil-rate band in addition to your £325,000 standard nil-rate band. That means, as a couple, you could potentially pass on £1million tax-free — as long as your estate meets the criteria and doesn't breach the £2million taper threshold. If those allowances remain in place and your only significant asset is your home, your daughter might not face an IHT bill at all. But of course, tax rules can and do change. It's also important to consider your own financial needs. Gifting away your home or locking it into a trust could limit your options later in life, particularly if you need to fund care or downsize. Probate may still be required, even if IHT isn't due, and it can come with administrative and legal costs. Getting clear advice from a financial planner or solicitor with estate planning expertise is a wise next step. In short, be cautious about complex gifting arrangements, especially if you're still living in the property.
Telegraph
20-05-2025
- Business
- Telegraph
Rayner's stealth taxes would crush growth
The Deputy Prime Minister Angela Rayner has proved that there is one thing she has a real talent for: coming up with stealth taxes. As this paper reveals today, Ms Rayner wrote to the Chancellor in March with a list of ways to squeeze more revenue out of those with savings or investments. The Deputy Prime Minister's ruses would damage the economy as a whole. Among the ideas Ms Rayner is pushing on the Chancellor are a freeze on thresholds for the 45 per cent income tax rate, measures to raise yet more in inheritance taxes, increasing the bank levy, and yet another clampdown on stamp duty that will, in effect, amount to another increase. Chancellor Rachel Reeves may be boxed in by her promise not to raise any of the main taxes, but with the economy stagnating, and with the wealthy exiting the country in escalating numbers, she will have to raise money from somewhere. There are two problems with Ms Rayner's little list. The point of Labour's pledge not to raise the main rates of tax was not to impose dozens of stealth levies instead. It was a promise to deliver faster growth and higher spending without taking more money out of people's pockets. Next, and more importantly, the stealth taxes Ms Rayner proposes will do maximum damage to the productive base of the economy. For example, if the government scraps the inheritance tax exemption for companies listed on the Aim market it may raise a little extra cash. But Aim was designed to help growing businesses raise money for investment; the exemption encouraged investors to take a chance on backing smaller businesses. If we starve them of cash, they won't be able to invest or grow. Freezing the thresholds for the 45 per cent rate of income tax will over time capture more and more middle earners in a bracket that was originally designed for the genuinely wealthy. It will take us back to the punitive rates of the 1970s, deter people from working, and drive wealth overseas. Each and every raid the Deputy Prime Minister proposes damages entrepreneurs, savers, or strivers. Ms Rayner will find a ready audience on the backbenchers and among Labour Party members for her old-fashioned tax-and-spend agenda. The Chancellor hasn't given in to her yet. Unless the Government can find a way of controlling spending, or boosting growth, then it will inevitably try to find new sources of revenue. Ms Rayner's nightmare list may be a terrible warning of what lies ahead.
Entrepreneur
19-05-2025
- Business
- Entrepreneur
Rough Ride: What family business can teach corporate world on reining in succession drama in the boardroom
If, like me, you've been watching the neo-Western drama Yellowstone on Netflix, you'll know the real drama isn't in the battle for cattle or land, but in who takes over the family ranch that Kevin Costner's John Dutton and his ancestors have spent nearly 150 years protecting. Opinions expressed by Entrepreneur contributors are their own. You're reading Entrepreneur United Kingdom, an international franchise of Entrepreneur Media. While the storyline may be fictional – and extreme (no spoilers) – the messy reality of succession is entirely real, especially for those of us who work closely with business owners. After more than a decade in executive recruitment, I've seen dramas play out in boardrooms and family kitchens across the UK. In family businesses, succession is more than a process, it's a way of life. Recent announcements by Chancellor Rachel Reeves around inheritance tax have brought this issue into sharper focus, with business owners – particularly in sectors like agriculture – keen to avoid huge and punitive tax bills when handing over the reins. Succession planning has never been higher on the agenda for family firms. The same urgency, however, isn't always mirrored in the corporate world, where succession is still too often treated as a compliance exercise – an HR box to tick every few years. Having worked with both corporate and family-owned businesses across the UK, one thing is clear. While neither is perfect, family firms typically approach succession with a seriousness and emotional intelligence many corporates still lack. In family enterprises, succession is inevitable and ingrained – often discussed around the dinner table long before any formal transition is announced. Compare that to many large organisations, where leadership transitions can be reactive, politicised, or alarmingly last-minute. Our recent research with EY on The Future CEO highlights the extent of the challenge. Just 47% of current CEOs believe they have a viable successor within their senior team, while 56% of functional leaders believe they could be the next CEO. That disconnect speaks volumes about how succession is – or isn't – being managed. Family firms, by contrast, usually have a named successor, even if that person still has some growing to do. While some may see this as nepotism, in practice it often leads to a long, deliberate process of development – complete with external experience, mentoring, and formal training. These businesses invest heavily in future leadership because their legacy depends on it. Succession in a family firm is deeply personal but also strategically critical. It's about passing on control, but also about ensuring continuity, culture, and long-term performance. In the corporate world, where tenures are shorter and incentives more short-term, this type of future-focused thinking is often harder to sustain. The best family businesses understand that good succession planning prioritises continuity over control, and that continuity comes from preparing the next generation with technical skills, emotional intelligence, cultural fluency, and stakeholder savvy. Too often in the corporate world, succession is reduced to talent grids and competency frameworks. What's missing are the softer, but crucial, attributes – resilience, humility, influence, adaptability. These are the very traits that define effective modern leaders. Another dimension that often goes unspoken is the emotional weight of succession. In family businesses, there's no avoiding it – your boss might be your mother, your biggest rival might be your brother, and your harshest critic might be sitting across the dinner table. That dynamic can breed dysfunction, yes – but it also builds a deep awareness of interpersonal dynamics. To navigate this successfully requires more than business acumen, it demands empathy, maturity, and courage – especially when the founder is still very much in the room. Corporates could benefit from embracing, rather than avoiding, the emotional undercurrents of leadership transitions. Succession doesn't just happen in spreadsheets, it happens in conversations. One of the smartest moves we see in well-run family firms is the strategic use of interim executives, mentors, and non-exec chairs to help successors grow into their roles. Sometimes an experienced interim CEO is brought in to steady the ship. Other times, a respected chair acts as a coach – not to steer the business, but to guide the successor. This is succession by design, not default, and it stands in contrast to what we often see in large corporates where CEOs either overstay their welcome or exit without any meaningful handover, leaving uncertainty and risk behind. The Future CEO report also highlighted a shift towards transformational leadership. Tomorrow's leaders need to be agile, authentic, and adaptive. Family businesses often understand this intuitively – they need leaders who respect the past but are not afraid to modernise. Those who succeed do so by balancing legacy with innovation, digitising where needed, challenging old assumptions, but never losing sight of the business's founding purpose. If corporate boards want to treat succession planning with the same level of intent as family businesses, here are a few principles worth borrowing: Make it continuous, not occasional – Succession planning should be embedded, rather than episodic. Invest early – Identify and develop future leaders before a crisis or vacancy emerges. Embrace mentorship – Pair potential leaders with experienced guides, inside or outside the business. Plan the exit as much as the entry – Create space for outgoing leaders to step back with dignity. Acknowledge the human side – Recognise that succession brings emotion, fear, and ego – and plan accordingly. Family businesses aren't flawless, and succession can be fraught and emotional. But they approach it with heart, realism, and long-term thinking – qualities corporates would do well to emulate. Oscar Wilde once said that life imitates art far more than art imitates life, but when it comes to succession, the corporate world could do worse than imitate the deliberate, human-centred planning that family businesses have been getting right for generations. Because whether you're safeguarding shareholder value or passing on a legacy, your business is only as strong as the next person ready to lead it.
Times
16-05-2025
- Business
- Times
Want to help the poor? Don't chase out the rich
Have you come across Gary Stevenson yet? He's a former financial trader, author and wealth tax advocate whose angry eloquence is perfect for our TikTok age. His videos, viewed almost 150 million times, warn of a rigged economic system where the rich exploit and hoard, leaving the poor assetless and adrift. It's time to tax the assets and not just income of the wealthy, he says, to restore fairness to society. Many Labour MPs agree. His message is urgent, compelling, energising — and completely wrong. First, he's being unfair to Rachel Reeves. She's doing her level best to go after the rich: taxing private schools, hitting non-doms and pursuing radical inheritance tax reform. We can see the results already, albeit not quite the ones she
Sky News
16-05-2025
- Business
- Sky News
MPs on farming committee call on Rachel Reeves to delay family farm tax
The UK's food security and the future of farming lies in Rachel Reeves' hands, a leading MP has said as a committee called on the government to delay farm inheritance tax changes. The environment, food and rural affairs (EFRA) committee has released a report calling on the government to delay the reforms for a year until April 2027. Chancellor Rachel Reeves announced in the October budget farmers would no longer be allowed to claim inheritance tax relief for farms worth more than £1m from April 2026. The move prompted multiple protests in Westminster by farmers who said it will threaten the future of thousands of multi-generational family farms. The EFRA committee, made up of seven Labour MPs and four Lib Dem and Tory MPs, said a pause in the implementation would "allow for better formulation of tax policy and provide the government with an opportunity to convey a positive long-term vision for farming". A delay would also protect vulnerable farmers who would have "more time to seek appropriate professional advice", the MPs said. The MPs raised concerns the change was announced "without adequate consultation, impact assessment or affordability assessment", leaving the impact on farms and food security "disputed and unclear". They said it risks producing "unintended consequences" and threaten to "affect the most vulnerable". The MPs have called on the government to consider alternative reforms. Alistair Carmichael, the Lib Dem chair of the committee, told Sky News: "There is a need for inheritance tax to be reformed. "The use of land purchase by the super rich as a means of sheltering their wealth is something which is not in the public interest or farmers. "But this is not the way to go about reform. "The risk is you see farmers selling out, they will sell out to people who are not going to use land for food production then we risk losing food security - we've seen how foolish relying on exports is after Putin's invasion." He added "as an outsider looking in", the way in which the Treasury handled the inheritance tax announcement, after Labour said in opposition they would not change it, "has created a real problem of political authority" for Environment Secretary Steve Reed. "It's a problem the Treasury themselves can solve," he said. "Their own backbenchers increasingly think they should solve this and our report today gives them an opportunity to do that if they choose to take it. "It really is up to the Chancellor of the Exchequer. It is over to her now." The committee report says before the autumn budget 70% of farmers felt optimistic about their futures, but that fell to 12% after the budget. The survey, by the Farmers Guardian in March, also found 84% of farmers felt their mental health has been affected by the announcement. 1:05 Farmers said the government announcing the closure of applications to this year's sustainable farming incentive with just hours to go, was also a cause. The committee said there are other ways to achieve reform, and called on the government to publish its evaluation and rationale for not following alternative policy measures.
