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IHT loophole worth knowing

IHT loophole worth knowing

Date: 2 February 2023 | By: cosgrove

In current market conditions, many bereaved people are finding that the investments they inherited have dropped in value - so here's an IHT loophole worth knowing . In a little-known loophole known as IHT share loss relief, it may be possible to claim a tax rebate when certain qualifying investments are sold at a loss.

However, strict rules, criteria and exemptions apply. For example, to be eligible for the relief, the sale of the qualifying investment
(shares listed on a recognised stock exchange excluding AIM, government bonds and/or holdings in investment funds) must be within 12 months of the date of death. Interestingly, few people reclaim the overpaid tax, with just 1,640 taxpayers a year on average (between 2014 and 2019) applying for refunds4.

With both the Inheritance Tax (IHT) nil-rate band and residence nil-rate band remaining frozen at existing levels until April 2026, at £325,000 and £175,000 respectively, many families are already receiving hefty IHT bills.

We see this tax as avoidable in many instances – it’s just that clients are not aware of the lawful actions you can take to do so. It just needs some smart inheritance tax planning.

For UK domiciled clients, Inheritance tax (IHT) is currently charged at 40%, and is payable on your estate once your net assets exceed £325,000. In the tax year 2019-20, 3.7% of UK deaths resulted in an Inheritance Tax (IHT) charge (gov.uk/2021). Inheritance tax receipts in the UK amounted to approximately 5.32 billion British pounds in 2020/21 (statista.com/2021)

Providing your family with lasting benefits means taking action now, so you can get some clear and trusted inheritance tax planning advice including finding out about any IHT loophole worth knowing!

 

Tax treatment varies according to individual circumstances and is subject to change.
4 FoI request Boodle Hatfield, 202

Source: Quilter Essentially Wealth Q4


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