The IHT threshold of £325,000 is frozen until 2017-18, which was previously announced in the 2013 Budget.
The government is consulting on extending the current IHT exemption for members of the armed forces whose death is caused by injury whilst on active service to members of the emergency services. Proposed legislation is expected in the Finance Bill 2015.
Tightening restrictions on deductions for IHT for non-Domiciled individuals
Property which is situated outside the UK and which belongs to, or was settled by, a non-UK domiciled individual is ‘excluded property’ and does not form part of a person’s estate, so is not chargeable to IHT.
Previously, a non-domiciled person could take out a loan to purchase excluded property and charge it on UK property, which would reduce the value of the UK property that was subject to IHT.
Legislation was introduced last year to allow a deduction for a liability only if it has not been used to acquire “excluded property”, except in a few specified circumstances.
This has been extended to close a loophole, to also include foreign currency UK bank accounts held by non-domiciled individuals. Although these accounts are not subject to UK Inheritance Tax if the depositor is non-UK domiciled and non-UK resident immediately before their death, they are not excluded property, so the liability restriction applying to excluded property did not apply to these accounts.
As announced in the 2013 Autumn Statement, the payment and filing dates for IHT will be aligned, and the grey area of when to treat accumulated income as capital will be fixed at a date of 5 years if it has remained undistributed. There is to be further consultation on the proposal to split the nil rate band available to multiple trusts set up by the same settlor, and to simplify trust charges.
Trusts with Vulnerable Beneficiaries
HMRC have confirmed the announcement in the Autumn statement that in addition to the changes already implemented to these trusts, the Capital Gains Tax (CGT) uplift on death will apply to trusts for Vulnerable Beneficiaries from 5 December 2013. The range of trusts that qualify for this special treatment for Income Tax, CGT and IHT is also to be extended from 2014/145.