Succession planning

There has never been a more important time to consider the succession plan for your family estate. Increasing uncertainty and volatility means it is crucial that your estate is in the hands of those that are empowered to protect its future. Alongside this, the Office of Tax Simplification has recently recommended changes to inheritance tax. Their report recommended the following changes:

  • A decrease to the inheritance tax rate from 40% to 10% for estates worth less than £2M;
  • A decrease to the inheritance tax rate from 40% to 20% for estates worth more than £2M;
  • An annual gift allowance of £30K;
  • An inheritance tax rate of 10% on gifts in lifetime over the annual gift allowance;
  • No further charge on lifetime gifts at death;
  • Removal of the gift with reservation of benefit rules;
  • Remove all reliefs including agricultural property relief (APR) and business property relief (BPR);
  • To charge un-used pension funds;
  • No CGT uplift on death;
  • An annual charge for trusts.

The removal of APR and BPR would have far-reaching implications for landowners, with estate values highly likely to exceed £2M, resulting in IHT at 20%. Whilst the IHT would be payable over ten years, it would require estates to generate sufficient profits to cover this or to take out borrowing.

Given the increased need to raise funds, estate owners should take advice and, where appropriate, consider banking the current APR and BPR by gifting property during lifetime, before existing measures change.

Estate owners should involve the family in succession planning discussions and the objective should always be to agree a strategy for the future of the estate, which includes the succession plan for the business and assets.

Frank Smith & Co Solicitors

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