Home | Falling asset prices could reduce your Inheritance Tax

Falling asset prices could reduce your Inheritance Tax

18 June 2009

Falling house and share values are worrying thousands of people planning to leave an inheritance - but national law firm Shoosmiths believes the recession could actually save them money through paying less Inheritance Tax.

Statistics issued by HM Revenue and Customs show a large number of people who die each year leave shares, or property other than the house they live in.

In the 05/06 tax year, 47% of taxable estates contained such assets, which were valued at nearly £9bn.

After deduction of mortgages and debts, this amounted to Inheritance Tax of approximately £2.8bn being paid by these estates.

Shoosmiths partner and private client specialist Karen Shakespeare believes people could reduce the amount of Inheritance Tax payable when they die by taking advantage of falling asset prices.

“Inheritance Tax is currently payable on estates worth more than £325,000,” she said, “but can be mitigated by making lifetime gifts of assets.

“Generally, any gifts over £3,000 are liable for Inheritance Tax if the person making the gift dies within seven years.”

And Shakespeare believes current low values of second homes, buy-to-let properties and shares provide a good opportunity to save Inheritance Tax on death.

“Lifetime gifts are valued at the date of the transfer, so if you give away assets worth £200,000 and die within seven years when the value has increased to £300,000, it will be the £200,000 figure that is subject to Inheritance Tax – a potential £40,000 saving to your estate. 

“If you die after seven years, the saving is £120,000.

“As long as you’re not giving away a house you need to live in, or assets that provide an income to live on, this is the ideal moment to consider lifetime gifts.”

For further information please contact:
Name: Alastair Gray
Phone: 08700 864096
Email: Alastair.Gray@shoosmiths.co.uk

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