Many basic assumptions have been shaken and what once seemed certain no longer seems that way. The safety of one’s capital and the robustness of the banking system are two fundamental concerns. Little wonder that IHT is unlikely to be top of the pile of client concerns at the moment.
However, life must go on. It is also true to say that the very falls in value that are causing such concerns are prospectively saving IHT at 40 per cent.
Be all this as it may, there is little denying that the Conservatives secured some excellent publicity for their proposed £1m nil-rate band just before the market cataclysm took place.
The £1m nil-rate band has reportedly been confirmed by a “Tory spokesperson” as being fully transferable in the same way as the current nil-rate band. In other words, raising the nil-rate band to £1m would not bring the abolition of transferability.
The introduction of a transferable £1m nil-rate band is, of course, subject to the satisfaction of two important conditions:
Subject to these two important conditions:
Before answering these key questions, it is important to keep in mind the following relevant facts that give an indication of the number of individuals that these proposals could affect:
The latter statistic is important as the value of the private residence is, for many, the main reason they have an IHT liability, despite the recent slowing of increases in value and, in some cases, stalling or falling values.
Many have commented that if the £1m nil-rate band is introduced, there is perhaps a strong likelihood that a significant number of couples and individuals may feel that IHT planning is no longer necessary.
To anticipate the effect that a £1m nil-rate band could have on planning activity, one could do worse than extrapolate the impact that the transferable nil- rate band has already had.
In the light of the Tory proposals, it may be necessary for advisers to give some consideration to the possible effects of the proposed increase for:
When considering these possible effects, it is important to keep in mind that the current depression of asset values, especially residential property, may contribute to a possible perceived reduced need to plan that will be added to by the “carrot” of a potentially significant increase in the transferable nil-rate band.
I will look at the factors to take into account in giving advice in succeeding articles.