Tax reliefs help families save £700 million during inheritance

Lamont Pridmore - Accountants

A new report has found that a significant proportion of the UK’s Business Relief goes to those with more than £1 million in assets.

Tax Justice UK, a campaigning organisation, has revealed that 234 wealthy families shared £458 million in tax relief in the 2015-16 year thanks to Inheritance Tax breaks via Business Relief.

The group said that this accounted for almost 80 % of the total Business Relief given in that financial tax year.

Business Relief can significantly reduce the value of a business or its assets when working out how much Inheritance Tax has to be paid.

Any ownership of a business, or share of a business, is included in the estate for Inheritance Tax purposes, but families can benefit from Business Relief of either 50 % or 100 % on some of an estate’s business assets, which can be passed on while the owner is still alive or bequeathed in a Will. 

The scheme allows individuals to claim relief on property and buildings, unlisted shares and machinery.

The same report also revealed that 261 families owning more than £1 million in agricultural property and assets shared £208 million in Agricultural Relief in 2015/16, which accounted for 62 % of the total relief given out that year.

Agricultural Relief also allows families to pass on some agricultural property free of Inheritance Tax.

In January, figures produced by HM Revenue & Customs (HMRC) revealed the cost to taxpayers of all Inheritance Tax reliefs has risen to almost £2 billion annually.

The Office of Tax Simplification has recently published its recommendations about changes to the UK’s inheritance tax regime including proposals which could affect the future treatment of Business Property Relief.  This ongoing debate about future changes, alongside the complexities of Inheritance tax could potentially impact your estate.

Meanwhile, the Labour Government has put forward its proposals for a “lifetime gifts tax”, which would reduce the inheritance tax allowance to £125,000.

Labour’s Land for the Many report indicates that this significant shift in the way estates are taxed could raise an additional £9.2 billion for the public coffers.

At Lamont Pridmore, we can help you to manage your estate in such a way as to minimise any liabilities for your beneficiaries. To find out more, please contact us.