Our columnist Mr Money Bags, who has decades of experience in Finance, an MBA, an advanced diploma in Financial Planning and not to mention his super business skills, is here to give you, our lovely readers some valuable tips and advice on money business matters. He is forthright and can sometimes be stern when it comes to your cash, but when it comes to finance he really is the expert. Read on for your business and finance advice…
Property price rises over the last decade or so have led to 25% of all properties selling for more than £325,000 in 2015. This is the threshold where after this figure all your assets are taxed at 40% after death. Inheritance tax has stayed the same over the last 7 years, whilst prices due to various factors including inflation have increased.
The treasury collected £2.69 billion in inheritance tax in 2010, and most recent statistics show this figure as £4.56 billion in the 2015 tax year. Insurance company Saga recently discovered that just one in ten people over the age of 50 know that the inheritance tax threshold is £325,000 for a single person. This is worrying as it clearly shows many people are not planning to save tax for their families, and are unaware of the implications of what happens when someone passes away to their estate.
If a person passes away the government want any tax calculated circa 6 months after the date of death. Some of the tax may need to be paid before grand of probate is granted. This means your family might have to find funds to pay tax before the property can be sold.
Is there any good news coming, or is it all doom and gloom for many more families in the future? The government has made some changes to try and reduce the tax burden on hard working individuals who are passing on their wealth; however please be aware the changes may not apply to all individuals.
At present, if someone is married or in a civil partnership, all assets passed to the surviving person on death will fall under an inheritance tax band of £650,000 for the surviving spouse. In the last budget the government announced upcoming changes to lift family homes worth up-to a million out of tax.
This will not be immediate, as a new tax allowance will start in 2017, which will rise as follows: £100,000 in 2017 and slowly increasing to £175,000 by 2021. It will then rise with inflation. However those with estate worth £2 million plus will have the additional allowances reduced for £1 for every £2 of their estate over £2 million.
The tax allowance above will only apply to one residence property; therefore if you have a few properties they will not benefit from the allowance. The property also needs to be passed to your direct descendants to qualify for the tax allowance.
This leaves a slightly bad taste in my mouth, as what about those people who choose not to have children, or unfortunately cannot have kids? In my view these people are put at a disadvantage, as they will not benefit from the new tax allowance if they want to leave funds or property to other people.
There is something I wanted to say at this stage, which is that if you are worried about your own tax circumstances then please get some help. There are plenty of websites that will give you more information, but in the likelihood you feel you might have a tax liability, there are many professionals out there who can help you understand and tackle it head on.
I find that there are two distinct types of clients I meet: those that do not care about tax, and those that are genuinely worried about it. If it worries you, don’t be afraid to get some advice.