Wealth Tax and Inheritance Tax
As we reach what will hopefully prove to be the final stages of the pandemic with the roll out of the mass vaccination program, attention will soon turn towards the financial costs of the Government response to the Covid crisis. Recent weeks have seen increasing clamour for the introduction of a 'wealth tax'. A report from the Wealth Tax Commission in December 2020 has suggested the introduction of a “one off” tax at a rate of 1% of total assets above £500,000 for any individual. According to the proposals, such assets would include private pensions and primary residences, and therefore many people who would not necessarily consider themselves to be 'wealthy' could find themselves caught in the net. Whilst the introduction of such a tax would have seemed unthinkable only a year ago, it does seem that all options are now on the table as Chancellor Rishi Sunak, considers how best he might hope to bring the nation’s finances back onto an even keel.
Were such a tax to be introduced it would doubtless dominate the national debate for a period, and it would certainly cause individuals to give serious thought to how they might minimise their liability. However, there has in fact been a much larger tax on personal wealth in existence in the UK for many decades in the form of inheritance tax. Inheritance tax is chargeable on private wealth in some circumstances above £325,000 at a punitive rate of 40%. Despite this, many wealthy individuals and families simply fail to give adequate consideration to their potential exposure to inheritance tax, with the result that the tax is paid in situations where it could have been avoided or reduced.
Exposure can be reduced by ensuring that proper use is made of exemptions from Inheritance Tax, such as the residence nil rate band and the transferable nil rate band. Consideration can also be given to the transfer of assets to future generations at an early stage. It is also possible to invest in assets which do not attract Inheritance Tax once owned for a period of 2 years, such as assets which benefit from Business Property Relief.
Specialist legal and financial advice is critical in assessing the inheritance tax position and in considering the possible means by which inheritance tax exposure can be reduced. GHC Wealth Management, in conjunction with their partner solicitor firms, are experts in providing advice on wealth transfer and on investment in assets which are efficient for inheritance tax purposes. In this New Year, when we all have more time than we might have expected to consider our financial plans, it is a good time to consider our inheritance tax position.
Nicholson Portnell, Solicitors