Cookies are small text files that are stored on your computer when you visit a website. They are mainly used as a way of improving the website functionalities or to provide more advanced statistical data.
Inheritance Tax Loan Change
Newsletter issue - June 2013.
A change in the way loans are treated for inheritance tax (IHT) purposes could increase the taxable value of your estate on death, and the amount of IHT payable. This change will affect IHT calculated on deaths occurring after the Finance Act 2013 is passed, (expected mid-July 2013) but applies to loans which are already in place.
At present any debts owed by the estate are deducted from the net estate after reliefs, such as business property relief (BPR), have been given. Broadly BPR provides 100% or 50% relief from IHT on the value of your business assets and unquoted shares. After the Finance Act 2013 is passed, the value of a loan must be deducted from the asset it was used to acquire.
Say in the past you increased the loan on your home to invest in your business, and that loan is still outstanding on your death. To calculate the IHT due that business part of the loan must be deducted from the value of your business and not from the value of your home. This reduces the value of your estate exempt from IHT under business property relief, and increases the taxable value of the remaining estate.
Also if the loan owing at death is not actually repaid by the estate to the creditor after death, that loan can't be deducted from the estate at all, unless there is some commercial reason for not repaying the loan.
Remember IHT is payable at 40% on the taxable value of your estate that exceeds £325,000. A lower rate may be payable if you leave at least 10% of your net estate to charity. There are other ways of mitigating IHT, but we need to discuss your individual circumstances to formulate a plan.
Book a Free, No Obligation Consultation
Take advantage of a free consultation to see how you can benefit from using Stanhope accountancy and advisory and find out the best way to deal with your tax, accounting and how to minimise your tax liabilities. Book now >
Get a Fixed Quote
We believe you should always be in control of your finances. For this reason we can offer many of our services on a fixed fee basis on agreed services >
Profitability Strategies
We can help you develop strategies to help your business grow without increasing costs specialized tax incentives to produce multiple benefits and help you increase your profit >
Your Business
Expert tax planning advice any size business tailored to you >
