He reiterates: “If you are philanthropically minded, gifts to charity are tax free.”
But recently, the Office of Tax Simplification has proposed changes to the seven-year period – in which gifts are taxed before death – cutting it to five years, as part of a body of recommendations to simplify IHT.
In its second and final report on the IHT review, published July 5, it also recommended taper relief should be abolished – where gifts exceeding the total nil-rate band of £325,000 and made three to seven years before death are taxed on a sliding scale.
Property
The residence nil-rate band gives an additional allowance on top of the current £325,000 threshold, but only if the property is left to certain people.
However, according to Ms Suter, this latest IHT break “has proved very complicated”.
Nevertheless, it means that a couple could, in theory, leave a £1m property free of IHT.
She explains that in the current tax year, clients get an additional £150,000 limit per person, rising to £175,000 from April 2020.
“However, the rules are tricky,” she says.
“You must leave the property to a ‘direct descendant’, so a child or grandchild, or step-child or step-grandchild, meaning that childless couples can’t make use of the allowance,” she explains.
“You also only get the full allowance if your estate is worth less than £2m, as you lose it at a rate of £1 for every £2 you are over the threshold.”
Victoria Ticha is a features writer at Financial Adviser and FTAdviser.com
