Tax & IHT guidance - Intelligent Money Private Clients

[pingu393]

PM3 said:

.....so I'll mull it over and set the money aside doing harder work than the student loan interest rate ...and see how I feel in a couple of years.
Personally I doubt ( and sincerely hope) she will not be one of those banking on not working hard enough to achieve an income level that makes it eventually pay off.

[Steve H]

B9 said:

Weird. Some of us do actually value the approach IM have taken.

I've benefitted from some of the answers they've given other members, despite there being no product for them to sell (capital gains tax, child benefit etc). I trust others have, too.

There are some fantastic professionals on this forum, and when the time comes I'll be in touch with the likes of Equus and Sarnie.

I hold IM in the same regard (albeit I've already signed up with them).

Exactly the same for me. Like many people I’m relatively clueless on this stuff and many other very specialist subjects so PH is the first place I look when I need help.

There’s no secret that IM have been sponsoring this part of the forum for a while along with dropping their entry fees to zero and having no minimum investment value for PHers. The extra stickies that have gone up are just a sign of how much interest there is in the information they offer for free to all users of the forum and the value they give for those of us that have become clients.


Anyway, back on topic.........

Intelligent Money said:

Beyond gifts between spouses and some additional allowances the assets of an individual’s estate above £325,000 are subject to IHT.
There is a further allowance of £125,000 for property that is passed to Children or Grandchildren.

Isn’t the £125k now £175k? I thought it had increased yearly from when it was introduced to this amount?

And for those that have been fortunate enough not to have to deal with any of this stuff yet, the allowances do not get used when someone passes their estate on to their spouse (because that is IHT free) but when that spouse dies their estate can use the allowances of both, effectively doubling the IHT exemption allowance.

Nik, could you confirm if this applies to the house allowance as well as the personal allowance please (and correct any other errors I’ve made there ).

[TR4man]

Steve H said:

Isn’t the £125k now £175k? I thought it had increased yearly from when it was introduced to this amount?

Yes, I think you are correct.

https://www.gov.uk/inheritance-tax

[Intelligent Money]

Steve H said:

Isn’t the £125k now £175k? I thought it had increased yearly from when it was introduced to this amount?

And for those that have been fortunate enough not to have to deal with any of this stuff yet, the allowances do not get used when someone passes their estate on to their spouse (because that is IHT free) but when that spouse dies their estate can use the allowances of both, effectively doubling the IHT exemption allowance.

Nik, could you confirm if this applies to the house allowance as well as the personal allowance please (and correct any other errors I’ve made there ).

Apologies Steve you are correct it is now £175k property allowance, I would love to claim typo but for some reason the £125k from 8/19 was stuck in my mind when I put the previous answer together.

You also correct that with a married couple if the £325k allowance isn't used on first death it passes to the survivor so there is £650K of allowance available.

Gifts/transfers between spouses are IHT exempt so as you describe if on first death the entire estate is passed to the spouse there is no IHT at that point at the £325k allowance has not been used as passes on with the estate.

Cheers

Nik

[pingu393]

Intelligent Money said:

You also correct that with a married couple if the £325k allowance isn't used on first death it passes to the survivor so there is £650K of allowance available.

Gifts/transfers between spouses are IHT exempt so as you describe if on first death the entire estate is passed to the spouse there is no IHT at that point at the £325k allowance has not been used as passes on with the estate.

Cheers

Nik

My dad died before my mum and I was warned that ALL of my dad's estate had to have passed to my mum for this to happen.

So beware of splitting your estate if you are first to die.

[Intelligent Money]

pingu393 said:

My dad died before my mum and I was warned that ALL of my dad's estate had to have passed to my mum for this to happen.

So beware of splitting your estate if you are first to die.

IHT can get quite detailed so it is sometimes difficult to keep the content generic as the application of the "rules" is were the detail lies.

If on first death some of the £325k allowance is used to make some gifts then only the remaining allowance passes to the surviving spouse.

As an example. If Dad gifts £225k to a child on his death and the rest of the estate passes to his wife, on her death there is an allowance of £425k, i.e. her allowance of £325k + The remaining £100k allowance from her husband.

You may plan to do it this way if the surviving spouse has no need for the £225k of asset because the asset is passed down IHT free and from that point any growth is also outside if the estate.

Cheers

Nik

[Steve H]

And does the property allowance pass on in the same way irrespective of whether that was not even available when the first spouse died?

[Intelligent Money]

Steve H said:

And does the property allowance pass on in the same way irrespective of whether that was not even available when the first spouse died?

Hi Steve H

The property allowance would apply at the time that the house became part of the estate for IHT assessment.

Cheers

Nik

[Spunagain]

Hi IM/Nik
A couple of questions. Is it correct that savings held in pension pots and Bonds are exempt from IHT?
Cheers

[PM3]

^^ Dream on ! ( or flabbergast me with revelation I was pitifully unaware of )

[dingg]

Spunagain said:

Hi IM/Nik
A couple of questions. Is it correct that savings held in pension pots and Bonds are exempt from IHT?
Cheers

In a sipp no inheritance tax due if you snuff it before 75 years old

[PM3]

dingg said:

Spunagain said:

Hi IM/Nik
A couple of questions. Is it correct that savings held in pension pots and Bonds are exempt from IHT?
Cheers

In a sipp no inheritance tax due if you snuff it before 75 years old

Glad I started reading this Forum area last year.....the learning goes on and on !!

[GR_TVR]

PM3 said:

Glad I started reading this Forum area last year.....the learning goes on and on !!

Good, isn't it
I don't know on the bond front, but I believe with regards to a SIPP, if the owner is under 75 upon death the benefits are passed on tax free.
If the owner is 75 or over, the benefits are passed on subject to the recipients marginal tax rate i.e. it is taxed as income.
I believe the recipient can choose how much to take out each year.

I'm sure others will be along with more info, but that's the gist as I understand it!

[LeoSayer]

dingg said:

In a sipp no inheritance tax due if you snuff it before 75 years old

SIPPs are outside your estate at all ages so attract no inheritance tax.

However there are some circumstances where, after your death, the beneficiaries of your SIPP may pay income tax on withdrawals.

[PM3]

GR_TVR said:

PM3 said:

Glad I started reading this Forum area last year.....the learning goes on and on !!

Good, isn't it
I don't know on the bond front, but I believe with regards to a SIPP, if the owner is under 75 upon death the benefits are passed on tax free.
If the owner is 75 or over, the benefits are passed on subject to the recipients marginal tax rate i.e. it is taxed as income.
I believe the recipient can choose how much to take out each year.

I'm sure others will be along with more info, but that's the gist as I understand it!

It peaked my interest as I am at the early planning stage of rounding up a few small employer DC pensions with a view to rolling into a SIPP ( not the reasonable DB final salary one that I will leave alone ) ....and I have been wondering what is the precedence of defining the beneficiary upon kicking the bucket .
If I state for example our offspring ( only one ) as opposed to wife .....does this get ignored as I have a simple will stating wife gets all upon my demise and child should It me both of us .
There is reasoning to this as basically when I kick it my wife does not need that extra SIPP money and if ( which absolutely expected) she outlives me and it will ultimately just get hammered when she dies and passed to our child. whereas ( and its not a lot ) an extra income boost pot for the young one will probably be of more use .
(English law )

[Mr Pointy]

PM3 said:

It peaked my interest as I am at the early planning stage of rounding up a few small employer DC pensions with a view to rolling into a SIPP ( not the reasonable DB final salary one that I will leave alone ) ....and I have been wondering what is the precedence of defining the beneficiary upon kicking the bucket .
If I state for example our offspring ( only one ) as opposed to wife .....does this get ignored as I have a simple will stating wife gets all upon my demise and child should It me both of us .
There is reasoning to this as basically when I kick it my wife does not need that extra SIPP money and if ( which absolutely expected) she outlives me and it will ultimately just get hammered when she dies and passed to our child. whereas ( and its not a lot ) an extra income boost pot for the young one will probably be of more use .
(English law )

You can nominate the beneficiaries of your SIPP/Personal Pension & the pension administrators can take that into acount, but I believe they are not obliged to do so.

[PM3]

Mr Pointy said:

PM3 said:

It peaked my interest as I am at the early planning stage of rounding up a few small employer DC pensions with a view to rolling into a SIPP ( not the reasonable DB final salary one that I will leave alone ) ....and I have been wondering what is the precedence of defining the beneficiary upon kicking the bucket .
If I state for example our offspring ( only one ) as opposed to wife .....does this get ignored as I have a simple will stating wife gets all upon my demise and child should It me both of us .
There is reasoning to this as basically when I kick it my wife does not need that extra SIPP money and if ( which absolutely expected) she outlives me and it will ultimately just get hammered when she dies and passed to our child. whereas ( and its not a lot ) an extra income boost pot for the young one will probably be of more use .
(English law )

You can nominate the beneficiaries of your SIPP/Personal Pension & the pension administrators can take that into account, but I believe they are not obliged to do so.

Indeed I have seen advice something like that before. I will open a SIPP anyway for purpose of consolidation ( some of which are overseas) ...the beneficiary thing I will play by ear for now . hell I could just nominate as suggested and at least its a chance . its not like otherwise its going to a cat home or some rouge relative

[pingu393]

PM3 said:

...its not like otherwise its going to ... some rouge relative

They'd be in the pink .

[Intelligent Money]

Spunagain said:

Hi IM/Nik
A couple of questions. Is it correct that savings held in pension pots and Bonds are exempt from IHT?
Cheers

I think a couple people have already answered on this.

Summary, both SIPP and Pension pots can be placed outside of the estate on death so no IHT is payable and the value of the pension isn't added to the estate so doesn't use any allowance.
Over age 75 the pot isn't subject to Income Tax rates in the hands of the beneficiary.

Unless used as part of a tax planning tool Bonds form part of the estate and are assessed for IHT

Regards

Nik

[Intelligent Money]

PM3 said:

It peaked my interest as I am at the early planning stage of rounding up a few small employer DC pensions with a view to rolling into a SIPP ( not the reasonable DB final salary one that I will leave alone ) ....and I have been wondering what is the precedence of defining the beneficiary upon kicking the bucket .
If I state for example our offspring ( only one ) as opposed to wife .....does this get ignored as I have a simple will stating wife gets all upon my demise and child should It me both of us .
There is reasoning to this as basically when I kick it my wife does not need that extra SIPP money and if ( which absolutely expected) she outlives me and it will ultimately just get hammered when she dies and passed to our child. whereas ( and its not a lot ) an extra income boost pot for the young one will probably be of more use .
(English law )

HI PM3

You can nominate anybody as a beneficiary and SIPPS are frequently used to pass benefits down to children. It is technically an "expression of wish" which means that the administrators can decide who to pay the benefits to and it is this that helps with the IHT tax efficiency. It is very rare for the benefits not to be paid to the nominated beneficiaries though.

Cheers

Nik