IHTNew Inheritance Tax Proposals – ‘The Bank of Mum & Dad’ Beware!

14th October 2020

If the new Inheritance Tax (IHT) proposals by the ‘All Party Parliamentary Group’ (APPG) go ahead, mums and dads intending to help their children get a ‘foothold’ on the property ladder need to consider carefully how they proceed.

As with so many tax reforms that are ‘intended to help us,’ the new IHT proposals are very much a case of ‘giving with one hand and taking away with another!’

Concerned with the increasing amount of middle-class families that find themselves being dragged into the current 40% IHT rate – largely due to escalating property values, a new flat rate of 10% is proposed – increasing to 20% for estates over £2 million. Whilst this might be considered a good thing, you also need to be aware that within the same proposals, the 7 year rule, which allows gifts of £3000 and writes off larger amounts if the donor lives longer than 7 years, would be replaced by an annual £30,000 allowance.

With the average house costing £240,000, a typical 15% deposit covered by parents would entail a ‘gift’ of £36,000. Under the new proposed £30,000 allowance and 10% flat rate IHT scheme, parents would be left with a bill of £600.

These IHT proposals could also have serious ramifications for the property market; particularly when you consider that the number of first time buyers has presently eclipsed the property boom levels of 2007 and that 40% of these FTB’s rely on help for their deposits from their parents. This increases to 45% and 60% in the South East and London respectively.

For advice on all IHT matters and the best way to assist your children, get in touch with Dunham McCarthy.

Home Leigh, New Garden Street, Stafford, ST17 4AG
01785 336222

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New Inheritance Tax Proposals – ‘The Bank of Mum & Dad’ Beware!

New Inheritance Tax Proposals – ‘The Bank of Mum & Dad’ Beware!