Inheritance tax and trusts
What announcements have there been in 2021 and are there any changes coming?
In the 2021 Tax Day documents, the government announced that based on responses to the consultation, they are not planning any comprehensive reform of trust taxation and they recommend stability. In the 2021 Budget, the IHT rules were left unchanged and the nil rate band frozen until 2026. While there has been much speculation about changes to the IHT rules, these two announcements when looked at together would suggest that for now the IHT rules, reliefs and allowances may remain unchanged.
This is good news for those already undertaking IHT planning, as it is much easier to plan effectively when the rules are known.
It is not good news for all. The nil rate band freeze is expected to bring in around £985 million over the next 5 years. This is due to the rising in value of property and other assets while the tax-free nil rate band remains at the same level, meaning more people become liable to IHT. Many of those falling into the IHT bracket for the first time would not have considered planning but that does not mean that they cannot. Simple planning can ensure reliefs and allowances are utilised to eliminate or minimise, any IHT liability.
While we speculate that IHT may not change anytime soon, it still seems likely that capital gains tax (CGT) will change. When planning for IHT, CGT can often be a part of the transaction so for those already planning, you may want to consider the timing of your planning to ensure that possible changes to CGT rates are factored in.
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