Nobody likes when a taxman gets hold of a chunk of their estate when they die, mainly when it becomes a necessity to sell the property to pay IHT of the inheritance bill. The RNRB (Residence nil rate band) is set at £175,000 which means that a couple is eligible to leave estate (combined) of worth £1 million without paying inheritance tax where a residence must be valued at least £350,000 or more, which is left for directions to the descendants. But, in cases when a person has an estate worth £2 million or more and is lost, the RNRB is reduced where the total value exceeds £2.35 million.
When IHT is required to be paid, there are several steps that looks appealing to reduce this fee. When a property is already handed over to the potential person for more than seven years before the donor’s death, IHT is not applicable. Handing the property to the children in the first place is a good option but there are some traps to look out for.
Giving away the main residence
In cases experienced by chartered accountants in Slough, where the main residence is given, there will be no tax to pay in terms of capital gains as long as the full residence exemption applies. But, when the property is retained as an investment property by the children, the capital gains tax will start from the date the property is acquired. By contrast, when the property is handed over as a gift at the death, to the value of death, there will be capital gains tax uplift, however, some IHT may apply (potentially at 40%).
If the parents decide to give their property to the children and still decide to live in it, problems may arise. Two main sets of anti-avoidance rules are present that may apply: GWR (gifts with reservation rules and POA (pre-owned asset) rules.
The GWR rules are applicable when the first owner of the property (parents) gives away the assets but still is enjoying benefits from it. A common example would be parents that decide to make their children the rightful owners of their home but still lives in it.
POA, on the other hand, imposes an income tax charge based on notional market rent of the property, on such previous owners that hand over the property but continue to get benefit from it. For more information take advice from nearby chartered accountants in Slough.
Investment property
When a property is bequeathed to a child, even if no money changes hands, attempting to remove it out of the death estate can result in a capital gains tax bill. The property is deemed to be disposed at market value because the child is a related person. The possible consequence is that it may cause a capital gains tax bill of 18% or 28% of the gain, which the person is liable to pay within a month.
Take advice
Giving property to save IHT can be tricky and getting things wrong can be easy. The best thing to do is to get professional accountants in Slough advice in advance for better results.
Being up to date with your taxes is very important in this emerging world of business.
Dealing with taxes on a regular basis can prove quite hectic and is comparatively a tricky task to deal with.
For such purposes we have accounting firms to help us, Adam Accountancy is one such firm which can assist with the management for your taxes.
The importance of tax planning has been explained further;WHAT DO YOU MEAN BY TAX PLANNING?These are certain methods employed by accountants such as accountants in Slough, to manage the payment of your taxes and to keep an exact record of how much money do you owe to your taxes.
You can hire chartered accountants in Slough to plan taxes for running businesses, wills, retirement, real state etc.DIFFERENT METHODS OF TAX PLANNING:Adam accountancy offers chartered accountants in Slough who can device various tax planning methods in accordance to your needs, these include;Short term taxation; this helps to reduce taxes on a yearly basisLong term taxation; this allows you to plan by the end of the year, beforehandPermissive taxation; these are in accordance to different law provisionsPurposive taxation; this plan gives you the capacity to make multiple investments.HOW TAX MANAGEMENT WORKS:Accountants in Slough can help you with the all the details and can provide you with a guideline before you start planning your taxes.
As an example, a total of £325,000 makes up a person’s inheritance tax, with a 40% being charged for anything above this threshold.
