Legal

IMPORTANT CHANGES TO INHERITANCE TAX

Anne-Marie Worth, Solicitor, Private Client, Mogers Drewett

From the beginning of the year, HM Revenue & Customs changed the reporting requirements in respect of deceased persons’ estates. What are these changes and who will be affected by them?

Previous legislation If an estate was classified as low value or exempt, then an ‘IHT205 Return of Estate Information’ form needed to be completed and submitted to the Probate Registry.

The requirements for an estate to be classed as excepted were, as follows: •The value of the estate was less than the Nil Rate

Band Allowance (£325,000). •On the death of the surviving spouse, the value of the estate was less than 2x Nil Rate Band

Allowance (£650,000). •The deceased left their whole estate, worth less than £1,000,000, to their spouse or civil partner, or to a charity. •The deceased held assets in a trust, worth less than £150,000. •Lifetime gifts made within seven years before they died did not exceed £150,000. •The deceased person lived permanently outside of the UK, died abroad, and the value of their assets in the UK was under £150,000.

What exactly has changed? From 1st January 2022 the following changes apply: •The requirement for completing the IHT205 form was scrapped for all estates classed as excepted; •The spousal/civil partner/charity limit for an excepted estate increased from £1,000,000 to £3,000,000. •The limit of the value of assets held in trust increased from £150,000 to £250,000. •The limit on lifetime gifts has increased from £150,000 to £250,000. •The new rules insert additional requirements for those living permanently outside of the UK to qualify for excepted status.

What does this mean for me? The estates of anyone who dies on or after 1st January 2022 will be affected by these changes if they are lowvalue estates or exempt estates.

The increase in limits will mean more estates will be treated as excepted estates and, as a result, the executor or administrator for the estate (Personal Representatives) will be required to complete fewer forms.

However, it is still vital that the Personal Representatives understand the rules, complete the correct forms (and pay IHT when required), correctly record the estate information and keep records for the beneficiaries.