Lost Will - Lost Inheritance?
CGT is charged on the profit/increase in value on sale or gift of assets. The rates are 18%-28% on disposals of residential property and 10%-20% on other assets. There’s an annual exemption of £12,300 per taxpayer. Disposal of your main residence is tax free and “Entrepreneurs Relief” may see the first £1 million of the gain on the sale of a business charged to CGT at the lower rate of 10%.
CGT is not a big earner for the Treasury- it represents only about 1% of annual tax revenue
A minority of tax payers ever find themselves liable to pay CGT - the wealth of the majority doesn’t generally extend beyond their house, pension fund , ISA’s and our savings at the Bank/Building Society.
Though the Chancellor’s brief to the OTT may be expressed as looking at ways of “simplifying” the CGT regime, even the least cynical will assume the hidden message is to find means of increasing the annual take from CGT; we all know the Government outlay during the Covid crisis needs to be recovered somehow. Refreshing the payment structure of an existing tax is more politically palatable than introducing a new “wealth” tax – even if any CGT changes will impact primarily on those perceived as “wealthy”.
The “simple” ways of increasing CGT revenue are self-evident:
Just as now, CGT rates have, historically, been lower than income tax rates - either directly or after the application of some form of indexation allowance. For example, back in 1983, when I first qualified as a solicitor, CGT was a flat rate 30% and the top rate of income tax was 60% (plus a supplemental rate for “investment” income).
A “capital”, rather than “income”, profit is still a profit. One can see an argument being made to bring CGT rates (on sales if not on gifts) in line with income tax. An increase in rates could be achieved at a stroke; it wouldn’t require a time consuming technical overhaul of the current structure for taxing gains.
So far as exemptions are concerned, we’ve already seen the limit for Entrepreneurs’ relief reduced from £10 million to £1 million in this year’s budget. This measure was widely predicted in advance of the Budget and business sales accelerated to completion before budget day where possible.
Principal Private Residence Relief (PPR) is the number 1 exemption from CGT.
It’d be a move of exceptional political bravery for a Chancellor to repeal or water down PPR (beyond tinkering with lettings relief and the 9 months sale window) and bring two thirds of UK households into a potential charge to CGT. While there may be absolutely no essential logic to treating profit on the sale of one’s home differently from any other profit, the Chancellor will be alert to our nation’s special relationship with the concept of home ownership and an embedded, if irrational, expectation that the family home be left untroubled by taxes.
If a change to PPR is the obvious choice for reform from an arithmetical/revenue perspective, the extent of such reform will be restrained by politics and public opinion. To the extent that increasing the tax burden only on the “wealthy “ might be perceived by the wider public as generally palatable, we may see CGT only on gains over a certain threshold.
None of us can know what, if any, changes will be made to the CGT regime, nor when. I’ve never been an advocate of taking steps with no other practical or personal motive beyond an attempt to avoid the impact of possible or rumoured tax changes.
The CGT regime may well remain unchanged; conversely, rates might be increased and exemptions reduced.
But there is one certainty; the CGT regime will not be getting more benign any time soon-if ever...
Where chargeable (or potentially chargeable) gains are already contemplated, especially on gifts to mitigate IHT, it must make sense to make those gains sooner, rather than later. They’ll be safe from any increase in rates, rumoured changes to IHT on lifetime gifts and to the availability of CGT holdover relief. Even if there were no worry over possible tax changes, with property and investment values still depressed on the back of the fall-out from the Covid crisis, it would make economic sense to act now in any event.
Jim Sawer is a partner in our Private Client team. He has a broad private client practice and has advised families in the UK and overseas, including those with commercial and landed interests, for over 30 years. Clients appreciate his ability to identify the true crux of a matter promptly and his results-orientated approach to resolving private client issues in the family context.
Trans adults with full decision-making capacity have the freedom to secure hormonal and surgical interventions to align their bodies with the physical attributes typical of the gender with which they identify (a process known as “transitioning”). However, for those who lack capacity, the involvement of others who are responsible for making decisions on their behalf is required, and the position can be complex as a result. This blog explores the approach to making decisions relating to transitioning on behalf of protected trans people, applying the best interests test and guidance from case law, and discussing the practicalities for decision-makers.
In recent years there have been calls for a change in the law to protect vulnerable adults from falling victim to what has become known as “predatory marriage”. This is due to a rise in cases where fraudsters have married vulnerable and often elderly individuals, without the knowledge of their loved ones.
The Office of the Public Guardian (OPG) and the Ministry of Justice are working together to modernise the process of making and registering Lasting Powers of Attorney (LPAs). The consultation is open to the public and will remain open until 13 October 2021.
Good news – The “secret” specialist HMRC unit set up in 2019 to examine the tax avoidance risks has been wound up after finding no evidence of correlation between the use of FICs and non-compliant behaviour.
Deputies are typically appointed because individuals cannot make decisions for themselves due to illness, like Alzheimers or dementia, old age or perhaps as a result of a catastrophic personal injury or medical negligence.
There are several reasons why someone may need the assistance of a financial deputy, stemming from incapacity due to an accident or a consequence of old age. There is however a darker side to this type of work that Court of Protection lawyers are seeing more and more of. This relates to those who have suffered some form of financial abuse and/or undue influence.
After a spinal injury the long-term impact on your life and that of your families can be significant. You may need a care package, a new home or adaptations to their existing accommodation, therapies and specialised equipment.
The pandemic has changed the world – there is no doubt we are all “online” far more now than before. Social media now extends into every aspect of our lives, from those notorious repetitive baby pictures to those ‘should never have been posted university photos‘. We collect and share moments of our lives in the digital world.
In the latest edition of the Financial Times Money Q&A, Jemma Garside, senior associate in our private client team answers a question: "Should I set up a joint lasting power of attorney for my mother?"
Subject to any restrictions or conditions in the Lasting Power of Attorney (“LPA”), a property and affairs attorney can make gifts on the donor’s behalf to the donor’s friends, family members or acquaintances on customary occasions.
Going through a divorce process is stressful. There are lots of things to think about and one of these is likely to be what you should do to protect your hard-earned money.
A donor must have the mental capacity to make a Lasting Power of Attorney (“LPA”) for property and affairs and health and care. The completed LPA is then sent to the Office of the Public Guardian (the “OPG”) for registration. Each page of the registered LPA will be stamped with ‘VALIDATED-OPG’.
As a business owner/shareholder, what would happen to your business if you were unable to make decisions – would someone be able to authorise payments or enter into contracts and keep the business running?
Lasting Powers of Attorney (LPAs) are vitally important documents. Our previous blogs have touched upon what LPAs are and top tips for anyone planning on putting an LPA in place. Most individuals should at least put in place a financial LPA to cover their home and personal finances. It is however a good idea in some cases to have a second financial LPA.
The last 12 months have put an awful lot of pressure on the family unit and sadly this has led to a spike in separation and divorce amongst married couples. With the end of the tax year fast approaching (last day Monday 5th April – Easter Monday) it is timely to consider the tax consequences of separations.
Whilst managing the property and affairs of another person a Deputy appointed by the Court of Protection may come across issues that require them to pay for legal advice and assistance on their behalf. Examples could include purchasing a property, challenging a care plan or obtaining advice about a dispute.
Partner and head of our Private Client team, James Ward, writes about the importance of entrepreneur's putting in place a succession plan to safe guard their reputation.
LPAs are important, and are steadily growing in popularity as individuals realise how necessary they are to support friends and family in the event that they lose mental capacity. Our previous blog gave an overview of how LPAs work and the requirements for making them. This time, we focus on our ten top tips for LPAs.
A Power of Attorney is a very important estate planning tool, especially when an individual loses capacity. Whilst the term ‘Power of Attorney’ seems to be thrown around a lot, it is often misunderstood or not used correctly. In fact there are several different kinds of powers of attorney that can be used for different purposes.
As we find ourselves in another national lockdown, the New Year presents an opportunity for individuals to review their assets and conduct some succession planning.
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