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21st March 2014

Budget 2014 - IHT - the good, the bad, and the ugly

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Amongst various other tax measures, in this year’s Budget the Chancellor also announced a small number of tax measures in relation to Inheritance Tax.
Good news for the families of individuals employed by the emergency services: If they were to die while on duty, or as a result of an injury sustained while on duty, no Inheritance Tax will be payable on their death. A similar exemption already applies to members of the armed forces and will be extended to also cover members of the emergency services.

Bad news for all non-UK resident and non-UK domiciled individuals with foreign currency bank accounts: Until recently a liability created by transferring borrowed funds into a foreign currency account could be deducted from the individual’s gross estate for Inheritance Tax purposes, whilst the funds in the foreign currency account would not be chargeable to Inheritance Tax. The new tax measure aims to make foreign currency accounts subject to the same restrictions on deducting liabilities as introduced by Finance Act 2013 last year, so that the aforementioned liability will no longer be allowable as a deduction against the gross estate for Inheritance Tax purposes.

Ugly news for bereaved families: The Office for Budget Responsibility believes that one in ten estates will be subject to Inheritance Tax by 2019, equal to an increase by 50%. This is mainly due to rising property prices and HMRC’s recent aggressive scrutiny of property valuations. With the Nil-Rate Band of currently £325,000 unlikely to change for another four years, more estates will exceed this tax free threshold and become taxable.

For further information on these tax measures and Inheritance Tax in general please contact Hauke Harrack on 01604 233233 or click here to email Hauke.