Have the effects of the pandemic reduced the value of your assets? If so, now may be the time to make the best of a bad situation.
There is a high probability that all tax rates will have to increase to help pay for the government’s costs in dealing with the pandemic. So, taking advantage of the current rates of tax on assets with depressed values could be sensible planning.
Lifetime gifts – outright gifts
It is always a good idea to make gifts as early as you can afford to do so, to start the 7 year clock running. If you survive the gift by 7 years, it will escape inheritance tax altogether. However, even if you die within 7 years of a gift, the value which gets taken into account at your death is the value at the date the gift was made. Giving away an asset which presently has a depressed value, but which may well rise in value before your death is still good planning as the increase in value will escape inheritance tax.
When making lifetime gifts of assets for inheritance tax purposes you also have to consider capital gains tax as the gift will be chargeable to capital gains tax (unless reliefs are available). Again, if the current value of the asset has fallen or is depressed the capital gains tax cost of the gift will also be reduced.
For more information on the items raised in this article please contact Katherine Hague on 01223 532749 or click here
to email Katherine.
This is an outline guide only. No action should be taken based only on the information here. you should take appropriate professional advices tailored to your specific circumstances.
This article is one in a series of four. To read the next article on Trusts please click here.