Skipton Financial Advisers | Mr and Mrs Rawsdon

Mr & Mrs Rawson's story

Announced in the 2015 Summer Budget, a new residence nil rate band can soon be used in addition to the existing threshold, eventually reaching £175,000 per person by April 2020. However, according to September 2016 research by Canada Life, a remarkable 75% of adults over 45 (with assets worth more than £325,000) don’t know anything about it.*

While this new allowance aims to help reduce the amount of families paying IHT, not everyone can qualify. For instance, you can only pass it onto your direct descendants (ie your child or grandchild) – so if you’re planning on leaving your property to a niece or close friend, for example, the new allowance won’t apply.

And as UK property prices are increasing, particularly in London and the South East, it may not be enough anyway. According to November 2016 forecasts by Savills, average house prices in the South East will be £366,200 by 2021 – above the £350,000 allowance for married couples.

Another snag is that it won’t be fully implemented for a few years. The initial amount in April this year will be £100,000 before it gradually increases by £25,000 a year until it reaches the full amount of £175,000. But from the study, only 7% of respondents knew when the final threshold would be introduced. Almost half (47%) were unaware of the phasing process and timescales, with nearly a quarter (25%) wrongly assuming the fully allowance would be available this year.

“The whole process was straightforward”

Mr and Mrs Rawson, from Lancashire, contacted Skipton upon identifying an IHT liability against their estate.

 Mrs Rawson explained: "We didn’t know much about inheritance tax at all, but we wanted to see if there was any way we could prevent our children from having to pay a large bill. It was very important to us to put plans in place. After considering the couple’s circumstances, their Skipton financial adviser, Matthew, recommended ways that would help them address their IHT liability."

Mrs Rawson added: "Our adviser sorted everything out for us – the whole process was straightforward". These plans were set up a few years ago, and Skipton have continued to provide the Rawsons’ with advice on their finances, including their IHT plans. With Skipton, it’s always a trustworthy experience.

 Mrs Rawson concluded: "Our financial adviser Matthew is very professional. He knows what he is talking about, and we trust him to do the best for us."

Inheritance Tax planning solutions may put your capital at risk so you may get back less than you originally invested. Inheritance Tax thresholds depend on your individual circumstances and may change in the future. Some areas of Inheritance Tax planning are not regulated by the Financial Conduct Authority.

Lack of understanding highlights a need for financial advice

A staggering 83% of people surveyed admitted they feel the current rules are too complex. So once the new allowance is introduced, this will no doubt create even more confusion. But especially as IHT no longer affects just the very rich – and is a problem for more families than ever – it’s essential that people are clear on the guidelines. Therefore, speaking to a financial adviser may prove highly worthwhile. Mark Butterworth, Head of Technical Services at Skipton said “We recognise how complex IHT is. But by seeking financial advice, you’re able to develop a greater understanding of the rules and put suitable plans in place to help you address your potential problem.”

*Survey of 1,001 UK consumers aged 45 or over with total assets exceeding the individual inheritance tax threshold (nil rate band) of £325,000. Carried out in September 2016. Percentages may not add up to 100 due to rounding or multiple answer questions. Research conducted by Atomik.

Castle

We can help you too

We can help you with a wide range of financial needs, including retirement and investment planning – helping you achieve your medium to longer-term goals and aiming to get you where you need to be.

Contact us today