Published December 2021
As the end of 2021 looms, it is natural for thoughts to turn to what the year ahead might hold. When it comes to probate, the key issue to highlight is changes coming in to Inheritance Tax (IHT) Regulations for excepted estates. For deaths occurring from 1 January 2022, more non-tax paying estates will be exempt from the need to submit detailed returns in order to obtain probate.
Acting on suggestions originally put forward by the Office for Tax Simplification, HMRC has amended the Inheritance Tax (Delivery of Accounts) (Excepted Estates) (Amendment) Regulations 2021.
The new amendments aim to reduce the reporting that excepted estates need to do, as well as expand the definition of an excepted estate. They include:
- Changing the threshold value of excepted estates from £1million to £3million (gross)
- Raising the limit of specified lifetime transfers and trust property from £150k to £250k
- Including cases where some of the available IHT threshold was used when the first of a married couple or civil partnership died and a claim is made for the unused percentage to be made available against the current estate
- Removing excepted status from foreign persons’ estates where the deceased either owned indirect interests in UK residential property or made lifetime gifts of UK assets above GBP3,000 in the seven years before death (unless the estate is not liable for IHT)
- Extending the time period for HMRC to ask personal representatives for additional information to prove the estate is excepted to 60 days
- Including in the grant application the gross and net values for IHT and the net qualifying value of the estate for IHT.
Any action to help make the probate and IHT reporting process smoother is to be encouraged. The increase to the thresholds are long overdue. The ability to estimate values for applicable cases will be welcome and help to facilitate early grant applications, which will speed up the estate administration process and ultimate distribution of an estate.
In addition to these welcome changes, it will still be important to remember that in order to set base values for Capital Gains Tax, formal valuations will be required for property, shares and higher value chattels. In addition, careful records for future use for example on the death of the first spouse, should still be kept to include records of lifetime gifts, together with anything else that might have an effect on the death of the second spouse.
The submission of the grant application and reporting of the estate values, are just two elements in the process of an estate administration. We have extensive experience of helping executors to administer estates including valuable tax advisory work and planning, both in respect of estate asset disposals and future planning, for example, through Deeds of Variation.
Please get in touch with one of our team firstname.lastname@example.org.