The Chancellor is on a tax raid...and at Hewetts Solicitors we don’t have a crystal ball...but Inheritance Tax is always something the Government looks at. Why? Because it’s an easy way of getting money. And quite frankly, the dead are hardly in a position to complain. Or vote!
The All Party Parliamentary Group for Inheritance and Intergenerational Fairness made recommendations to change the law regarding Potentially Exempt Transfers in their report which came out almost 12 months ago.
The SEVEN YEAR rule
Under existing law, gifts made by an individual (subject to a number of exceptions) are potentially exempt of tax for 7 years. After the seven year period, the gift is considered to be “out of the account of the donor” meaning the gift is exempt from tax. Tax laws refer to these gifts as “Potentially Exempt Transfers” or “PETs”.
Why are PETs useful?
Being able to give a gift to a child or grandchild can really help reduce inheritance tax by reducing the size of an estate. It can be very useful to help younger members of the family, for example paying for education, university, a house purchase or deposit. Providing you live for another 7 years from the date of the gift, the gift is Inheritance Tax free.
What is the Government planning?
It’s difficult to say for sure if the Government will make a tax raid on PETs this year. However, with pressure on the public finances it is likely they will take the All Party Parliamentary Group’s ideas seriously. The report suggested a tax of between 10%-20% where a gift is over £30,000.
Act Sooner Rather Than Later
If you were thinking of giving a cash sum to a family member, (or anyone you want) then look at doing it sooner rather than later. If you are considering making a gift of something other than cash, then legal advice is strongly recommended, as there are stringent anti-avoidance rules in place that can catch people out.
For tax and inheritance planning please get in touch with Tim Butcher.
Published on 17/12/2020