Early and regular reviews are the key to tax and estate planning

Nicola Brant recently shared her thoughts with The Telegraph’s Good Life supplement

Rumours continue that changes to both Inheritance Tax (IHT) and Capital Gains Tax (CGT) may be announced in the Autumn Budget. While we will have to wait and see if that is the case, it does seem that some alterations to these taxes are likely, following a report from the Office for Tax Simplification in 2020.

As both these taxes can have a considerable impact on your estate, now is a good time to consider how careful planning can help mitigate your exposure to them.

We regularly help clients to navigate the complexities of the tax landscape, allowing them to effectively plan for the future, protect their assets and pass on their wealth to the next generation.

There are a variety of steps that can be taken when it comes to CGT and IHT including:

Transferring assets

Assets can be transferred between spouses and civil partners at “no gain, no loss”. In life, couples can take advantage of two annual CGT allowances, effectively doubling it on a disposal. On the first death couples can also obtain an uplift in the value of assets, thereby wiping out inherent capital gains. Technical changes have been mooted, which would end such planning opportunities between couples.

Setting up trusts

A trust is a legal arrangement where ‘trustees’ hold assets for ‘beneficiaries’, and they are often created as part of an estate planning exercise, usually with a view to reducing the amount of IHT that is paid on a person’s death. By transferring property or other assets into trust and surviving seven years, the gift of the assets into the trust will typically fall out of play for IHT. It is often possible to “hold over” the gain so no CGT is payable at the point of transfer into the trust. However, many clients may choose to realise gains while CGT rates are at a historic low.

Hold over relief

Hold over relief can also be available on the transfer of certain business and agricultural assets and means that the chargeable gain can be postponed. However, if the assets are later sold, the gains will then be taxable in the usual way, although it may be possible to reduce the rate of CGT on the first £1 million.

Tax planning is an extremely complex area. While it is possible to potentially reduce your exposure to CGT and IHT, getting it wrong can lead to significant consequences. It is wise to seek advice at the earliest opportunity. Get in touch with our expert team info@ts-p.co.uk

The article first appeared in The Telegraph’s Good Life supplement.