The inheritance tax planning specialist notes the allowance for single people remains unchanged while the situation for those who have already conscientiously planned to utilise both allowances such as using Will trusts will also not change.
WAY Group chairman Paul Wilcox says: For the purposes of spin, no news is sold as good news.
The firm says “not a lot” has changed from the situation pre-PBR, when a spouse could put in place a discretionary Will Trust, whereby on the death of the first spouse, 300,000 would be moved to their beneficiaries without being subjected to IHT. With the death of the second spouse, an additional 300,000 could also be passed free of the unpopular tax.
Way Group says tax advisers have regularly been warning couples that they should include a discretionary trust within their Wills to make sure that the first to die utilises their Nil Rate Band for IHT purposes. Wilcox says: This is because there is a full spousal exemption on assets gifted between spouses and consequently the personal IHT tax break (Nil Rate Band) of the first to die often remains unused.
As a means of spiking the Tory guns and making it appear that he has doubled the Nil Rate Band, Darling has now made the allowance transferable. To make a one-off difference to widows and widowers, whose late spouses failed to use their own allowances, he has in other words retrospectively reinstated their late spouses allowance in transferable form, so that they now have a ‘double allowance’ to use when they die.
Wilcox adds: What has always been possible through thoughtful planning and a minor alteration to one’s Will is now automatic – but without any real financial benefit of extra tax saving.