Key points from the Chancellor's Autumn Statement 2014
From a Private Client perspective, the main areas of interest relate to the new transferable ISA limits and also the inheritance tax rules for trusts.
Following the successful introduction of the transferable nil rate band allowance in 2007, legislation is to be introduced to permit ISA allowances equal to the value of a saver’s ISA holdings on their date of death, to be transferred to their surviving spouse or civil partner. Previously ISAs lost their tax-free status on death so this could result in the loss of tax free income/growth.
It would be helpful if this announcement meant that the ISA holding can simply be re-registered in the name of the surviving spouse or civil partner, so there is minimal work required for all involved. However, information available at present indicates that the surviving spouse will instead invest an additional amount into their own ISA. These new rules apply to deaths from 3 December 2014, although the surviving spouse will not be able to invest the transferable amount until 6 April 2015, when the annual ISA allowance will also increase from £15,000 to £15,240.
Unfortunately, there was no mention of excluding investments in ISAs from Inheritance Tax.
Regarding the inheritance tax rules for trusts, following three recent consultations on this topic, many trust professionals will now be breathing a sigh of relief with the news that HMRC is not now going to introduce a ‘single settlement lifetime limit’. The background to this issue it too long and complicated to reproduce here, but it is good news for individuals, their executors, trustees and trust professionals alike. HMRC’s decision to still simplify the inheritance tax rules for trusts is also very welcome, although to many trusts, the expected rule change will have little practical impact.
Finally, it is noted that targeted anti-avoidance legislation will be introduced to target certain multi-trust planning ideas. Compared to the sledgehammer approach previously used to crack ‘nuts’ they didn’t like to taste, this is a better way to tackle things, but yet again this will depend on the legislation actually introduced.
For more information or to discuss anything in more detail, please contact Rachael Dronfield.
