The Main Menu for the Brooks Green Website
Chartered Accountants | Business Development Specialists | Registered Auditors.
Abbey House, 342 Regents Park Road, Finchley, Barnet, London, N3 2LJ
(Also offices in Milton Keynes, Buckinghamshire)
Growing your business is our business
We read that the UK housing market is in the doldrums. Historically, situations such as this tend to be relatively short term. The reality is that house prices are at an all time high. This is very good news if you want to sell or to realise some of the equity in your home. It can mean bad news where the family home represents a significant part of the estate of an individual who dies. Inheritance tax (IHT) planning with the family home has become a major issue.
Let's say right at the start that no tax planning should impair your ability to live worry free and secure in your home. There has to be a balance and personal needs and priorities must take precedence over tax planning. It is also important to say that arrangements to try to give away an interest in a home in lifetime are fraught with difficulties caused by some complex tax anti-avoidance rules.
In considering the tax options, the starting point must be to look at the impact of the new IHT rules. These rules allow any proportion of the nil rate band unused on the death of the first spouse or civil partner to be used on the death of the surviving spouse or civil partner, where the second death occurs on or after 9 October 2007. The nil rate band is currently worth £312,000, so a potential maximum of £624,000 is available on the second death.
For many people, where the only significant asset in the estate is the family home and the value of that property is currently well below £624,000, the IHT planning can be kept very simple - leave the property to the survivor on the first death and let two nil rate bands hopefully eliminate the tax problem on the second death.
Where the property is already worth around or above the two nil rate band figure of £624,000, there may be some advantage in looking to make a transfer on the first death. This can only be done if the property is owned as tenants in common. Where the property is owned as joint tenants, it will pass automatically to the surviving spouse or civil partner.
The transfer of the first spouse's or civil partner's interest (up to the value of the then nil rate band) could be into a trust written in their Will or it could be made as a direct transfer to the children. In either situation, the occupancy of the property by the survivor should be protected and half of the future growth in the property will take place outside of their estate. The trust route may also enable the very important CGT exemption for private residences to be maintained.
This is a complex subject. If you would like further advice on this area please contact us and we would be happy to review your options with you.
We provide four Quarterly News Journals annually, packed with useful breaking news, all intended to keep you up to date with the latest information. We display one years worth of news, just in case you have missed something.
We offer of all four of our quarterly news editions (AND the Budget Edition) in printed form to all our clients free of charge. Call us on 0800 146134 or contact us to subscribe.