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Would you leave the country if there was a 95% tax?

Dominic Thomas
March 2026  •  2 min read

Would You Leave the Country if there was a 95% tax?

I was at an investment conference the other week and a well-known speaker asked the audience of financial advisers to raise a hand if they would leave the country if there was a 95% tax. A lot of hands went up. So presumably, many of them would. Good news for me, an audience that easily self-identifies.

A thoughtful adviser might have paused to wonder, “95% of what?”  a better adviser may have thought “at what level of income or assets would the 95% tax rate apply?” an even better adviser may have wondered what was being exchanged or traded for the 95% tax? surely each person should have thought, “leave the UK for where?”.  All this really reveals is our biases and inability to think critically – something that I believe is important when helping you plan your future.

Today we live in a knee-jerk-response-driven culture. It’s been brewing for years, from poorly framed questions at sports finals like “how do you feel?” to makeover shows with a big reveal. Reaction is the stimulant and is being increasingly weaponised. Pose a question to a MAGA supporter and watch them implode.

I saw a headline recently that effectively said the King was pocketing millions from unclaimed estates. Naturally, the headline was designed to prompt a reaction.

To clarify – if you die without a Will and with no obvious family to benefit, your estate tax will be effectively 100% (as it all goes to HMRC).  That’s right a tax bill of 100%. At least, that’s the way I imagine it would be posed.

Technically what happens to an unclaimed estate is that it reverts to ‘the Crown’ after 30 years of remaining unclaimed. This has an appropriate Latin term – bona vacantia, which has nothing to do with U2 going on holiday but means “ownerless assets”.

Naturally there is a Government department that manages the process of Bona Vacantia … creatively named the Bona Vacantia Department or BVD.

According to the BVD, there are currently (January 2026) around 5,500 unclaimed estates, nearly a third of them in London and Surrey. You would imagine therefore that the estate of anyone who died prior to 1996 would now have reverted to the Crown, in fact there are a few (currently just 18) that remain on “the list”. The current oldest being the estate of William Baker of Eastbourne, Sussex, who died in June 1974. There are 188 estates that in theory are due to revert to the Crown this year (deaths in 1996).

The BVD handle around 30,000 company and estate cases each year, with a further 60,000 or so low value estates handled digitally. This all generates income for the Treasury (about £71m in 2025).

“The List” which is regularly updated can be found online at the BVD, here is the link for you to check if there is an estate that you may be connected to:

https://www.gov.uk/government/statistical-data-sets/unclaimed-estates-list

There was around £4m in 2024/25 of payments to entitled kin.

Would you leave the country if there was a 95% tax?2026-03-09T09:10:38+00:00

Is your pension being taxed too much?

Dominic Thomas
July 2025  •  2 min read

Income from your pension and a little less conversation

For those of you who have been using the 2015 pension freedoms to access lumps of money from your pensions, there is some good news (I hope).

As of 6th April 2025, if you are taking lump sum income (or indeed regular income) from your pension there ought to be less hassle from HMRC. If you have already done this with your pension, you will know that the pension company have to adhere to HMRC tax rules and invariably have to ‘over-tax’ your pension income, meaning that you have to reclaim it via a P55, P53Z or P50z form from HMRC. In fairness, this process has been improved a lot and cases tend to be resolved within 6-8 weeks. However, only if you reclaim it!

HMRC have confirmed that this system (which has resulted in pensioners being over-taxed to the tune of £1.3bn since 2015) is finally set to be overhauled following years of campaigning.

Since the system was put in place, over 470,000 claims totalling £1.37bn have been made for refunds. In Q4 of 2024 £49.5m was repaid to the 14,612 people who submitted forms.

From April, HMRC has announced that it will move much more quickly to replace these ‘emergency’ tax codes with regular tax codes, which will make sure that the correct amount of tax is deducted in real time. Hopefully this will reduce the need for form-filling to claim back over-paid tax, particularly where people make multiple withdrawals in a single tax year.

HMRC Announcement

HMRC made the announcement in its latest ‘Pension Schemes Newsletter’ (January 2025 Number 166) in an article entitled ‘helping customers get on the right pension pay faster’.

“From April 2025 we are improving how tax code information is used for those people who are new to receiving a private pension, so they pay the right amount of tax from the outset. We will automatically update the tax code for customers who are on a temporary tax code and would benefit from being on a cumulative code — this means they’ll avoid an overpayment or underpayment at the end of the year. There is no need to contact HMRC and once a tax code has been changed we’ll inform customers by letter or digitally if they’ve signed up for paperless in the HMRC app or online.

You do not need to make any changes to your tax coding process as we will automatically change these codes. However, as we’re systematically changing the tax codes for these customers you will receive notices for tax codes that have been automatically adjusted as they happen. As well as benefiting customers who will receive the right pension pay quicker, you may also see a reduction in queries you receive on tax code errors.

This small change is part of our wider commitment towards improving our customer service experience.”

So, hopefully a little less paperwork, but expect ever more access and accountability through the new HMRC app (which I have not yet tried myself). You may not be dancing in the aisles, but I’m reminded of Elvis…

A little less conversation, a little more action, please

All this aggravation ain’t satisfactioning me

A little more bite and a little less bark

A little less fight and a little more spark

Close your mouth and open up your heart and, baby, satisfy me …

So … why not … well done HMRC!

Here is the Official JXL Remix video of Elvis Presley – A Little Less Conversation

Come on – how many tax blog posts manage to link to Elvis?!

Is your pension being taxed too much?2025-07-31T15:40:34+01:00

Coming to your inbox – the latest tax headlines

Dominic Thomas
April 2025  •  4 min read

Coming to your inbox – the latest tax headlines

This morning (Wednesday 23rd of April) HMRC provided a regular release of information concerning tax receipts. It makes interesting reading for those of us who work with tax for a living, but for most, well … not so much. In essence, it covers the tax collected up to the end of the 2024/25 tax year, though there is always some adjustment made. Let’s start with the headline figure.

HMRC collected £857billion in tax for 2024/25 up 3.4% on the previous year. The trend is ever upwards for the collection of tax, at least from those of us not evading it.

Graph 1

The data in the chart above shows:

  • annual receipts over the last 20 years have grown from £402.9 billion in 2005 to 2006, to £857.0 billion in 2024 to 2025
  • receipts as a proportion of GDP over the last 20 years have grown from 28.4% in 2005 to 2006, to 29.8% in 2024 to 2025
  • the slight fall in 2008 to 2010 was due to a period of economic slowdown
  • receipts fell to £584.0 billion in 2020 to 2021, due to the economic impact of the COVID-19 pandemic and the subsequent government policies to support business and individuals

Even in my small world, the sector media focuses on what stories resonate. The item that grabbed the most attention recently was about inheritance tax “up to its highest level ever!” Whilst true that £8.2bn was paid in inheritance tax, this made up less than 1% of all tax receipts. This tells us a lot about the direction of politics – a focus on the 1% rather than the majority.

This is the chart that media focus on – the rising tide of inheritance tax.

Graph 2

Of course, this is a truth and clearly £8.2billion is a lot of money and we are all aware of the reality that more inheritance tax is going to be collected due to pensions falling within the scope of the tax from April 2027. It’s a tax we feel perhaps more directly as a large chunk of an estate heads off to HMRC for doing, well… very little.

However, in the context of all taxes paid, we can see where most (57%) of tax is generated – income tax, national insurance and capital gains tax. All of which will rise due to reduced or frozen allowances (capital gains and tax bands).

Here’s the political bit that you could sense was coming… income tax, national insurance and capital gains taxes are generally not paid by the very very ultra rich. Income taxes are reduced when derived as dividends and NI is only paid on earned income. Borrowed money (borrowing against your portfolio) is not taxed (though interest is charged, it is less than tax rates) and as shares are not sold unless valuations collapse, capital gains are not triggered. Add in some tax incentives for particular investments and you may not have any tax to pay at all…

Or to put it another way…

Ref*

Coming to your inbox – the latest tax headlines2025-04-27T19:26:18+01:00

ISAs are being ”Simplified”

Dominic Thomas
April 2024  •  5 min read

ISAs are being ”Simplified”

I don’t like sounding (or being) cynical (there’s a but coming isn’t there!) … but – when a Government or HMRC use the word “simplification” they seem to merely describe their own thought process and nothing else. The intention is usually good, the real-world working, well … not so much.

There are some rule changes, announced by the Chancellor in the Autumn statement, that are designed to simplify the scheme and encourage more people to invest tax-free, allowing for a more ‘balanced’ investment portfolio. There are too many ISAs being used as cash deposit accounts by ‘nervous’ investors. Our clients tend not to fall into this trap, but of course millions of people do. Inflation is best beaten over time by investment into assets that grow (holdings in companies listed on the world stock markets). Cash is simply giving banks your money so that they can invest it for their benefit.

Here are the six reforms from HMRC:

The Government announced a package of ISA reforms and will make these changes to ISAs from 6 April 2024:

  1. Increase the age for opening Cash ISAs from 16 to 18 and over. This is consistent with the age requirement already in place for opening Stocks and Shares, Innovative Finance and Lifetime ISAs.
  2. Allow subscriptions to multiple ISAs of the same type, with the exception of Lifetime ISA, within the tax year, removing the limit on subscribing to one ISA of each type per year. All subscriptions must remain within the overall ISA limit of £20,000.
  3. Remove the requirement for an investor to make a fresh ISA application where an existing ISA account has received no subscription in the previous tax year.
  4. Allow Long-Term Asset Funds to be permitted investments in an Innovative Finance ISA, which does not require access to funds within 30 days.
  5. Allow open-ended property funds with extended notice periods to be permitted investments in an Innovative Finance ISA.
  6. Allow partial transfers of current year ISA subscriptions between ISA managers.

The government also plans to hold discussions with industry on allowing certain fractions of shares to become permitted ISA investments.

Most of this will not impact you, everything we do here at Solomon’s is flexible and one of the benefits of regular reviews is that we can assess and check ongoing suitability of the financial products we have arranged for you and the portfolio being used.

If you have any questions at all, please get in touch. If you need a review sooner than normal or feel one may be overdue, please drop us a line.

ISAs are being ”Simplified”2025-01-23T10:50:33+00:00

Taxing times

Dominic Thomas
Jan 2024  •  5 min read

Taxing times

Tax is perhaps one of the most divisive issues.  At the time of writing, just before the Christmas break 2023, the Scottish Government has announced that it is imposing the additional rate of income tax (45%) at a much lower level.  Unlike England and Wales, the Additional Rate will start at £75,000.

Here in England and Wales, the 45% rate starts at that “only a quango could come up with it” number of £125,140 for tax year 2023/24.  So someone earning more than £125,140 pays 45% income tax, but in Scotland the line is drawn much sooner.

By comparison, a Scottish resident earning £125,140 will pay an extra £2,507 on the same income. I doubt that the extra tax is enough to prompt thoughts about moving south, but it may well alter behaviour at the ballot box.

As a reminder, the tax rates for this tax year (2023/24) which comes to a close on 5th April 2024 are as follows:

Band Taxable Income Tax Rate
Personal Allowance Up to £12,570 0%
Basic rate £12,571-£50,270 20%
Higher Rate £50,271-£125,140 40%
Additional Rate Over £125,140 45%

These are the income tax rates on earned income, not dividends (which have lower tax rates).

If you are breathing a sigh of relief because you live in England or Wales, remember that this tax year saw the Government reduce the higher rate band so that Additional Rate begins at £125,140 rather than £150,000.

Most of us have been impacted by inflation, yet the personal allowance remained frozen as did the basic rate tax band. So more people pay more income tax. This is what the media and whoever is in opposition, like to call “stealth taxes” basically an increase in tax in real terms.

Additional Rate tax was introduced in the tax year 2010-11, and saw 236,000 people pay 45% raising £34.5billion. Ten years later, the HMRC 2020-21 data saw this number increase to 481,000. There is no doubt that whichever way one observes the data produced by HMRC, we all pay more tax.

There are of course some things that you can do about reducing tax or even obtaining tax reliefs, these are all part of a good financial plan. However what I often observe is how little attention is paid to good arrangement of financial ‘stuff’ so that you can minimise tax payments. How much and where from become really important when drawing money from your portfolio. It’s one thing to get tax relief or use an allowance, it’s another to draw money out so that you pay less than 20% tax.

I recently produced a White Paper that you may find of interest called ‘Understanding Adviser Fees’, which includes and explanation about the value that we bring. Whilst I firmly believe that every little helps, if you focus purely on costs and ignore taxes, you will quickly wonder why you bothered. You can find the paper (which is designed to be readable – feedback welcome) here.

Taxing times2024-02-01T09:21:01+00:00

Is it time to give up driving Miss Daisy?

Dominic Thomas
July 2023  •  8 min read

Is it time to give up driving Miss Daisy?

Amongst the showers that interrupted the tennis, I spotted a piece on the BBC news site. The clickbait that caught my eye “People should plan retirement from driving”. The article is about families challenging the older generation with a question about their ability to drive. Pause on that for a moment. I once heard a joke that basically said that the two things you cannot criticize anyone for are their sexual prowess and their driving. In fact, the offence to challenge either appears almost equally and deeply hurtful.

The latest attempt by the regulator to ensure the right things are being done, (without being too obviously a new lick of paint such as FSA to FCA) is called “Consumer Duty”. A large element of this is about vulnerability. In short, are you more likely to misunderstand advice or be “taken advantage of” because you are either temporarily or permanently “vulnerable”. The term is of course open to interpretation, the intention though is very well meaning.

However, such discussions are rarely easy. Imagine being told that you are no longer fit to drive. So many of us cherish our independence, which is what our ability to drive represents. Indeed if you live in a rural area, your car may be your practical connection to wider society. Yet getting this wrong (which likely means a serious accident happened) will have devastating impact. There is a huge risk of causing offence, appearing patronising or controlling, yet this is “for your own good”.

So how will you know when it is time?

I have been struck by the wisdom of several of our older clients. Two incidents stand out. The first had the foresight to not simply visit local care homes, but she booked herself in for a week or so to see what the level of care was like. She wasn’t impressed and made other arrangements. The second possesses a grasp of self-awareness and a wisdom that I hope I achieve. He knew that at some point he wouldn’t know what he didn’t know. If that sounds a little Donald Rumsfeld, its intended. In short, he wanted me to take over the reigns so that his affairs remain in top notch condition.

Most of us are reluctant to become reliant on others. We generally place very high value on our own ability to make our own choices, we also have a tendency for overconfidence in our own abilities. Ask a room of people to raise their hand if they consider themselves a “better than average driver” the majority will raise their hand, which of course statistically doesn’t hold with logic. The majority cannot be above average.

So in our planning for you, we will increasingly be faced with ever more difficult conversations as we all age about how we protect ourselves from ourselves. Our role is to speak truth and consider your future in the context of all we understand. The BBC article is a sobering reminder that we cannot ignore things simply because it may offend.

Currently your driving license expires when you reach age 70. You retain the right to renew. I remember a short film by David Ackerman starring John Cleese called “Taking the Wheel” (2002) which is an amusing take on why his 90-year-old-mother refused to give up driving.

Is it time to give up driving Miss Daisy?2025-01-23T10:54:22+00:00

Sweet charity

Alex Truesdale - sweet charity

Alex Truesdale 
April 2023  •  10 min read

Sweet Charity

Will writer Alex Truesdale has championed the inclusion of charitable giving in Wills since joining the “Remember a Charity in your Will” campaign in 2011. Alex prepared a Will for veteran stuntman Rocky Taylor, including a gift to the Variety Club of Great Britain, which he signed shortly before recreating an infamous stunt involving jumping off a 40 foot high inferno at Battersea Power Station.

Ten years later, the devastating impact of COVID upon the third sector means that it is ever more reliant on charitable donations – of which legacy giving makes up 16%. Thankfully HMRC recognises the importance of charitable giving, allowing an unlimited inheritance tax (“IHT”) exemption on gifts to UK registered charities – saving 40% IHT.

We asked Alex for her top tips when considering including legacies to charity in your Will:  

  • Remember to check that your chosen charity has been officially recognised and has a Registered Charity Number or “RCN” – this also helps with the identification of the recipient organisation if there has been a name change or an amalgamation;
  • If you wish to donate internationally, contact the charity – it may be possible to make the donation through a UK local branch or recipient charity in order to qualify for the IHT exemption;
  • Consider a Letter of Wishes to specify how you would like your donation to be applied by the recipient charity – you may wish to specify that it is directed to “charitable purposes” only, or to support a particular campaign or project, instead of covering administrative and staff costs;
  • Donations of 10% or more of your overall estate will not only qualify for an IHT exemption but, if drafted correctly, can also entitle your estate to a discounted rate of IHT of 36% on non exempt gifts, effectively bringing the estate’s tax bill down by 10%. You can consider capping the gift in the interests of certainty but remember this might cause the loss of the discounted IHT rate if your estate value rose by the time of your death;
  • If you are considering a donation of a percentage of your total estate, ramping this up from single digit percentages to 10% can result in a win-win whereby the charity (and in certain circumstances, your remaining beneficiaries!) all receive more at the expense of HMRC;
  • And finally…never leave your executors in the invidious position of having to decide which charitable beneficiaries should benefit in your Will. Once Wills are admitted to probate they are public documents – this can lead to a flood of “begging letters” by charities keen to press their case.

For further details or to order a copy of Alex Truesdale Wills Limited’s brand new 36-page Client Guide please contact Alex on 07887 946557 or alex@alextruesdalewills.com

*Please note that this content has been taken from our Autumn 2021 Spotlight edition, facts & figures may have altered*

Sweet charity2025-01-28T10:04:52+00:00

TAX TRUTHS – A PARTY OF TAX CUTTING?

TODAY’S BLOG

NEW TAXES CLAIM £50BN AHEAD OF NI RISES

I’m going to assume that you are old enough to know that what a political party says and what it does are not the same thing at all. Here in the UK we tend to vote for the “least bad” option, at least, thats the only way I make sense of it.

New levies imposed on businesses over the last decade have raked in more than £50bn for the Treasury, as the UK’s tax burden rises to its highest level since the 1950s. The bank levy, apprenticeship levy, soft drinks tax and a range of other charges have all contributed to the public purse, according to analysis by Thomson Reuters.

It comes as National Insurance is set to rise in April 2022, adding 1.25 percentage points to the tax levied on employers and on their workers’ pay packets. These new taxes have proven themselves to be a successful way to bring in billions of pounds in a relatively short space of time. The new National Insurance surcharge is sure to be a success from a public purse perspective, but will add considerable financial and compliance stresses to both businesses and individuals.

The extra National Insurance fee, which will be known as the health and social care levy from 2023-24, is set to raise around £17bn per year, outweighing even the largest of the previous new taxes.

Here is a link to NI rates for 2022/23

SOFT DRINKS TAX

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The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

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TAX TRUTHS – A PARTY OF TAX CUTTING?2025-01-21T16:33:57+00:00

NFT – NEW FAIRYTALE

TODAY’S BLOG

NFT – NEW FAIRYTALE

Perhaps you haven’t heard about NFTs, if not give yourself a pat on the back. However, it’s possible that you have seen something online or had a younger person mention it to you and perhaps it left you a little perplexed. I am not a fan. To me this is yet another of “The Emperors’ New Clothes”. I am concerned that a lot of people will say goodbye to their hard earned savings for fear of missing out and not understanding investing, in a culture that appears to tell us not to invest in the stock markets. Give me a moment and I will try to explain why.

One of the main reasons for people being scammed is due to a fear and lack of understanding about the stock markets. The market volatility is regularly reported by what passes as news, keeping you informed about the latest FTSE100 movement. “Billions were wiped off the markets today” is a phrase that regularly rolls off news presenters’ tongues, yet rare is the day (have I ever?) when we hear the “billions wiped on”. We are all kept in a state of anxiety about impending doom and it is quite deliberate. It gets your attention.

SO WHAT… HOW DOES THIS ENCOURAGE SCAMS?

Well, fearing the investment of your money in the most regulated, scrutinised exchange, where data is published and reviewed every day of the year and has been for decades, it seems that the volatility and the anecdotal “I lost money” or “my dad lost money” triggers the big red panic button that most of us have. So many turn to alternative forms of investing in the mistaken belief that they are less ‘risky’ (in fact some seem to be a ‘sure thing’). Oh, and for good measure, we humans are impatient, we love a happy ending and have a tendency to ignore the hard work that went into creating one (if it even is an ending). Or to put it another way, to approve of and want successful investments once they have happened.

NFTs The New Clothes

INVESTING IN REAL COMPANIES

When you invest money into the stock market or funds of equities (as is more likely) you buy shares in companies that trade internationally. They do so by making or providing goods and services that we want, need or require. As markets are generally competitive, they strive to improve what they do to ensure their own sustainability. Where companies often go wrong is cutting corners to reduce costs and increase profit rather than improving what they do and communicating this properly. On occasion, you may have an objection to the company, or its sector or the people that lead it. So you can (we can) screen out some of these based on ethical, environmental, social or governance standards. At the same time, you know that ‘cheap’ is unlikely to be high quality, but you also know that we don’t all need our weekly shopping from Harrods. There is a range; a spectrum. Sometimes we pay more for things because of the feelings that it evokes, sometimes we do so because we instinctively know it to be better.

Your investment appreciates in time as the company you invest in grows. You also receive a share of the profits made (dividends). Quite how much and how well these companies ‘perform’ is largely down to how well they run and… luck. By luck I mean – the right place at the right time, for example being a PPE manufacturer and a pandemic arrives.

You get your money back when you sell your investment. In the interim, you’ve hopefully had some dividends and an improvement in the value of the share. If you hold a handful of companies and one or two fail (such as the Kodaks of the world) then you have a proper loss. If you hold thousands, perhaps an entire market, then the impact of any failure is significantly reduced.

INVESTING IS NOT GAMBLING

Placing a sporting bet or a stake in a casino, you are hoping for a win, or something close to that to get your money back, plus the incentive to make the bet in the first instance. You may get back nothing – which is far more likely. That’s gambling – the risk of complete loss. For some people this is a small bit of fun (I can think of many better things, but I won’t judge), for others it becomes an addictive habit that can destroy families.

When you consider investment in proper companies (shares in them) over time, going back to the start of your lifetime, there is only one direction of travel for the combined value of your investments. Upwards. Yes there are bumps along the way (volatility) but you own real assets (companies) making and providing real products and services.

THE NEW CLOTHES

The digital world and our obsession with it, has given some people the idea that a digital image is worth something. These NFTs (Non-Fungible Tokens) are in my opinion the equivalent of the Emperor’s new clothes. The value is talked up by nefarious online forums and chatrooms and ‘traded’.  I would not touch them with the proverbial barge pole. If in the event I am wrong about this in say three decades time, that’s fine with me as I will be holding assets that provide regular income from actual profits from making real products and services. I can and will happily live with that and until proven otherwise, I will not aid anyone into deliberate folly.

HMRC’s NFT SEIZURE IS A WARNING TO ‘INVESTORS’ AND TAX CHEATS

The UK tax authorities have confirmed their first ever seizure of a non-fungible token (NFT) following a probe into an alleged £1.4million VAT fraud. Her Majesty’s Revenue & Customs (HMRC) said it had confiscated three NFTs, along with £5,000 in other crypto-assets, and arrested three people as part of a fraud investigation concerning around 250 sham companies. It claims the three suspects, who have not been publicly named, used a variety of ‘sophisticated methods’ to try and conceal their identities, such as false invoices, pre-paid unregistered mobile phones and virtual private networks.

NFTs are tokens representing the ownership of a digital asset, which could be an artwork, an image, music, or even a tweet that have their own unique signature and cannot be exchanged for another asset of the same type. But there has been increasing worries that these digital tokens, as well as cryptocurrencies, are being used by criminals to hide their illicit financial gains. Nick Sharp, the Deputy Director of Economic Crime at the HMRC, said: “Our first seizure of a Non-Fungible Token serves as a warning to anyone who thinks they can use crypto-assets to hide money from HMRC.”

Understand the real risk and buy real assets. You have been warned.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

PRIVACY POLICY  |  DATA PROTECTION

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

Take Survey

PRIVACY POLICY  |  DATA PROTECTION

NFT – NEW FAIRYTALE2023-12-01T12:12:53+00:00

Giving and Inheritance Tax 2021/22

Dominic Thomas
March 2022  •  4 min read

Giving and Inheritance Tax

Part of your tax year end planning may involve making some gifts that help reduce the value of your estate with the knock-on effect of reducing inheritance tax (hopefully a long time in the future though… right?!).

Anyway, the uncertainty that Capital Gains Tax faced last year was mirrored by IHT (inheritance tax). That too had been subject to a review by the OTS (Office of Tax Simplification … yes it does sound like something from a Peter Sellers sketch) commissioned in January 2018, which had seemingly got lost in the Chancellor’s in-tray. Thankfully, after nearly four years, the end of November 2021 saw a statement confirming that there would be only one administrative change to IHT (first announced in March 2021), easing the paperwork burden for many executors. IHT year end planning is, thus, also business as usual, meaning that you should consider using the three main IHT annual exemptions:

The annual exemption

Each tax year you can give away £3,000 free of IHT. If you did not use all the exemption in 2020/21, you can carry forward the unused element to this year (and no further), but it can only be used after you have used the current tax year’s exemption. For example, if you made no gifts in 2020/21, and you gift £4,000 in 2021/22, you will be treated as having used your full 2021/22 exemption and £1,000 from the previous tax year.

The small gifts exemption

You can give up to £250 outright per tax year free of IHT to as many people as you wish, so long as they do not receive any part of the £3,000 exemption.

The normal expenditure exemption

The normal expenditure exemption is potentially the most valuable of the yearly IHT exemptions and one which the OTS wanted to replace. Under the exemption, any gift – regardless of size – escapes IHT provided that:

  • you make it regularly;
  • it is made from your income (including ISA income, but excluding investment bond and other capital withdrawals); and
  • the sum gifted does not reduce your standard of living.

This last exemption is not easy to prove. It would help your Executors and therefore your beneficiaries if you follow our guidance and requests to update your income and spending each year. Honestly, we don’t do these things to simply get you to complete forms – there is a logic and it’s all for your benefit (we do appreciate that it is a pain!). You can do this using our spending plan or simply update the information on the portal. If I have worked on your plan recently, the figures there also need to be checked. Basically we need to evidence your spending – or rather your executors will.

Giving and Inheritance Tax 2021/222025-10-06T12:04:26+01:00

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