John Szepietowski discusses Estate Planning 2021: Beyond Covid-19

Given the events of the past year, it is likely that we are going to see changes to Inheritance Tax (‘IHT’) and Capital Gains Tax (‘CGT’) in the future. The Office of Tax Simplification and the All-Party Parliamentary Group have made a number of suggestions.

These changes concern aligning CGT rates with income tax rates; removing the CGT uplift on death; removing or curtailing valuable IHT reliefs such as Business Relief and Agricultural Relief; and reducing the seven-year survival period to five for IHT on gifts and abolishing taper relief.

In light of these proposed changes, this review shall include several estate planning steps that may be shrewd to consider:

Triggering any chargeable gain

It is apparent that CGT is an easy target for reform. If you are considering disposing of or selling assets at a significant gain, now may be the more favourable tax climate in which to do this. Whilst any prospective reform may take some time in being enforced, it is certainly worth consideration.

Take advantage of reliefs such as Business Relief

Business Relief has been under scrutiny for some time. It can be argued that it has strayed from its original purpose which was to protect vulnerable family businesses, given that it is now available to many large, well-established companies, such as some of those listed on AIM. It may be shrewd to trigger this relief now for the benefit of your family and future generations. Like all reliefs, Business Relief will not be around forever and there are growing concerns that in the next major reform, this shall be removed.

Make a Gift to an individual

A Gift to an individual has always been deemed a straightforward way of reducing your future IHT bill, on death. This is because outright gifting maintains simplicity and involves minimal cost and administration. Such gifts however provide no control or protection for the donor, which is something that has become increasingly important in these uncertain times. At present, any gift made to another individual would be classed as a Potentially Exempt Transfer and no IHT will be payable on the gift, as long as the individual making the gift survives 7 years after. If the individual passes after 3 years for example, tapering relief is available and the gift will not be charged at the conventional 40% IHT rate, but a reduced IHT rate. However, there are growing concerns that this may be removed and reformed with a 5 years’ survival requirement to avoid IHT and no tapering relief.

Prepare a Will

Asset protection and security has become more of a focus than ever before. In these unpredictable and uncertain times, having a Will in place is vitally important. A Will can be tailored towards your specific needs and encompass your desired wishes. A Basic Will may be appropriate for some, and even a Mirror Will, whereby a Will is drafted for you and your spouse/partner on very similar terms. Yet, some individuals may require specific trusts to be set up in favour of a chosen beneficiary or class of beneficiaries. Having a Will in place shall make the process of obtaining probate for your executors far more straightforward and furthermore, it allows the intestacy rules to be avoided.

At Audley Chaucer Solicitors, we have a specialised Private Client department that can help you draft your Will and ensure your Estate benefits from any viable reliefs and exemptions, please contact John Szepietowski at Audley Chaucer Solicitors on 01372 303444 or email us at or visit our Linkedin page.


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