Monday, August 28, 2006

China thinking of introducing Inheritance tax

China is thinking of introducing Inheritance Tax as the wealth gap increases between rich and poor. This seems strange at a time when we are looking at either reducing it or scrapping it all together.
Read the full article from the Shanghai Daily

Sunday, August 27, 2006

Make sure you have the right Wills

Most people seem to have a mental block when it comes to writing a Will. As the saying goes there are only two things in life that are certain and they are Death and Taxes. Now unfortunately science has not come up with a patent cure all that will help us evade the inevitable, but there is something you can do about the taxes.
Burying your head in the sand and ignoring the inevitable is not an option therefore everyone should have a Will.
There are three basic reasons people do not write a Will
1) Apathy - I know I should write a Will but I haven't got round to it
2) The Fear factor - If I write a Will I'm going to die
3) Bloody mindedness - Its not my problem I will be dead.

For people who fall into point 1 the answer is to make the process easier and simpler.

For this that fall into point 2 the answer or more importantly the question they should be asked is if you think your are going to die if you write a Will why do you have car insurance? - Do you think you are going to die if you have a crash? Obviously not but they have car insurance because the government makes them have it.

For those that fall into point 3 unfortunately there is no answer for these people and all they are going to leave is a financial mess for their loved ones.

Over 60% of the population of England and Wales haven't even written a basic Will!!
Those that have written a Will think it is a once in a lifetime process. Not true. They will review their mortgage, their investments and other financial products but their Will is generally out of date and bears no resemblance to their situation at present.

The trap I see people falling into all the time is "I leave everything to my wife/husband/partner and then onto the children" This is where most people have written "Mirror Wills"
The problem with this is that as their estate has increased in value including their house value then they have failed to utilise their tax allowance for Inheritance Tax purposes. What they should be looking at is to change their Will to a Nil Rate Band discretaionary trust Will. This can save a family up to £114,000 in IHT. For a full explanation of how this works click here.

What happens if a Will is challenged?

Most people don't realise that anyone can challenge a Will in court if they feel that there has been any hint of collusion, or un due influence on the Testator (the person writing their Will).
To highlight what can happen take a look a this article from the Guardian. It also highlights what happens when someone dies intestate (i.e. dying without a valid Will).
In this case even though the deceased left over £10 million the second wife was only due the first £125,000 of the estate as the deceased will was contested and found to be invalid.
here is the link: High court declares will invalid

Tories won't be cutting Inheritance Tax

The Conservatives are looking at ways of easing the burden of inheritance tax, including the possibility of exempting a deceased person's main home from the 40 per cent levy, George Osborne, the shadow chancellor, said yesterday.
But he ruled out any early move to abolish inheritance tax, as proposed by Stephen Byers, one of Tony Blair's allies, saying that the Tories had to put economic stability before tax cuts.
An increase in property prices has resulted in a sharp increase in the number of estates in the UK paying inheritance tax - up by 72 per cent in the five years up to 2004, according to a recent study.
More than 30,451 estates, most worth less than £500,000, were liable for the tax. A further 22 per cent rise to 37,000 is expected by next year, according to Halifax, which carried out the study.
It is calling for the inheritance tax threshold to be raised to £430,000 in line with house price inflation.
The threshold for inheritance tax has risen by 85 per cent since 1996 - but the housing market has grown by 179 per cent. It is currently set at £285,000, though Gordon Brown, the Chancellor, has promised to increase it to £325,000 by 2010.
Mr Byers, the former transport minister, writing in The Sunday Telegraph, said that inheritance tax, which is expected to raise £3.6 billion this year, was a "tax on death" and called for it to be abolished. But he was immediately slapped down by supporters of the Chancellor, who dismissed calls to abolish the tax as "nonsense".
Mr Osborne, interviewed on BBC Radio 4's Today programme, was asked whether an incoming Conservative government would abolish inheritance tax. He said Mr Byers was right to argue that inheritance tax had become increasingly unfair. But he added that it would be an expensive tax to abolish and, as a possible future chancellor, it would be "irresponsible" for him to commit the Tories to scrapping it.
Mr Osborne said the Tories were looking at options for reforming inheritance tax. These included raising the threshold, cutting the rate, or exempting a person's primary home

Tories to give Tax cuts?

George Osborne said today that the The Tories will look at cutting stamp duty on shares if they get elected in the next election. What does that me to you and me? Not a lot directly but indirectly it could have a massive effect on our pensions. Most pension companies trade in stocks and shares and the 0.5% duty applied to these share trades impact on the value of your pension fund. They have not however committed to abolishing Inheritance Tax. Why not?. Osborne has agreed with with Stephen Byers that inheritance Tax is unfair but cannot commit to scapping it. Why not? Perhaps its because they have looked at the figures and come to the conclusion that it brings in too much money to just scrap it. If they want to reduce tax on middle England then this is where they should start. Read the full story from the telegraph here

Monday, August 21, 2006

Theres been a dramitic increase in Inheritance Tax cases

The number of estates in the UK paying inheritance tax rose by 72% in the five years up to 2004, according to a study.
According to the Halifax an increase in property prices left more than 30,000 estates - most worth less than £500,000 - liable for the tax.
This is only going to get worse as they are prediciting a 22% increase 2007.

For most estates below £500,000 there is a simple solution and that is to write what are known as in the industry as Nil Rate Band Discretionary Wills or IHT saving Wills.

For a full explanation of how these work click here

Is Inheritance Tax fair?

Inheritance tax (IHT) affects estates which are valued at more than £285,000.
There has been opposition to the tax from all sides of the political spectrum but the government has so far avoided making any changes.
Yesterday former cabinet minister Stephen Byers called for a scrapping of inheritance tax calling it a Tax on thrift, hard work and enterprise. I dont think the tories would ever scrap IHT all together but they might increase the threshold to a more realistic level which would take a large percentage of the families in the trap at the moment.
The Treasury insists that Inheritance tax is "fair" and only effects 6% of Estates.
I don't know where the treasury gets its' figures from but the majority of clients we see are in the "Inheritance tax trap", due to either hard work, good financial management or simply due their houses rapidly rising over the last few years. All these families want to do is pass on their estates to their children. There is no hint of tax avoidance for most of the clients we see who sometimes don't even realise they have a problem.
For married couples and people in a civil partnership there is one very simple step they can take. Get their Wills written!!.
Simply by using both their personal Nil Rate band allowances for IHT they can get their estate up to £580,000 before any IHT is due. Dont forget there is no IHT between spouses due to the inter spousal exemption.
For more information go to Estate Planning Solutions or visit our on line channel

Extremely Useful tax tables

I have come across this Independent Financial Advisors site that has an extremely helpful set of Tax tables. They cover most aspects of Tax allownaces from Income Tax to Inheritance Tax. they are up to date and laid out in a very easy to understand way.
click here for the Tax tables

New Lens site

Well I have really embraced cyberspace and have started a Lens site. Dont know what one is? well neither did I untill a few days ago. I was looking at someones profile on ecadmey and it had a link to a Lens site so I clicked through and there it was. so I clicked the create the make your own lens site. It was really easy to set up and I will be using it in conjunction with our web site and this Blog site.
Click here for our lens site

New Tax Guides

Have you got a taxing problem? Take a look at our new Tax guides at our Tax guide bookshop.
click here for all the information