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Rising property prices mean more will be on the hook for inheritance tax

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This year’s runaway house prices rises mean that more people could find themselves liable for inheritance tax when they are left a property, money or other assets after someone has died.

New figures from HMRC show that inheritance receipts in April to May 2021 were £966million – £340million higher than the same period last year, due in part to an increase in the value of many people’s homes.  

Financial advisers say significant increases in property values may mean that more estates will nudge past the threshold where inheritance tax is due, without them realising it.   

Tilney, the financial planning firm, has issued a stark warning about IHT – saying rising property prices, along with the buoyancy of the stock market, could draw more people into the ‘inheritance tax web’.

Taxing times: House prices rises have pushed homeowners over the inheritance tax threshold

Taxing times: House prices rises have pushed homeowners over the inheritance tax threshold

The latest official figures from HM Land Registry, which reported on house sales in April, showed that house prices had risen 8.9 per cent in the past year to an average of £250,772. 

If you give away your family home to your children, £500,000 is the maximum value that your estate can reach before you start being liable for inheritance tax – or up £1million if you are a surviving spouse or civil partner who already inherited the property from them.

If you don’t fall into this category, your limit is £325,000 – the standard nil-rate band.

This is Money analysis of Land Registry price paid data shows that more than 19,500 homes were bought for over £500,000 in the first quarter of this year.  

In the first quarter of 2010, the first full year after the inheritance tax threshold was last changed, the figure was less than half that, 7,800. 

The nil rate band is fixed, which means that for every £10,000 the value of the property grows over £325,000, the owners’ inheritance liability increases by £4,000. 

Compounding the situation is the fact that the threshold will not change for at least five years. 

House prices have increased by nearly 15 per cent in some UK areas - so those hoping to pass their home on after they die could be unwittingly setting family up for an inheritance tax trap

House prices have increased by nearly 15 per cent in some UK areas – so those hoping to pass their home on after they die could be unwittingly setting family up for an inheritance tax trap  

The Government recently took the decision to freeze the £325,000 nil-rate band until at least April 2026.

‘The freeze means that even before any fresh reforms to IHT are introduced, taxpayers could be stung if there is even a modest increase in their estates – which is quite possible given that property and share prices have been on the rise,’ said Ian Dyall, head of estate planning at Tilney.

The nil rate band has remained at £325,000 per person since April 2009, meaning that it will have remained unchanged for 17 years by the time the freeze ends.

However, the Government did bring in the £500,000 nil rate band for those passing on their main home to their children in 2017. 

Inheritance tax: who needs to pay? 

Inheritance tax is a tax on the estate (property, money and possessions) of someone who has died.

The standard rate is 40 per cent on anything above the threshold of £325,000.

There’s normally no inheritance tax to pay if either:

  • The value of your estate is below the £325,000 threshold 
  • You leave everything above the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club

If you give away your family home to your children (including adopted, foster or stepchildren) or grandchildren, your threshold can increase to £500,000. This because of the ‘residence nil rate band’ which adds £175,000 to your allowance.

This relief tapers away if the deceased’s total estate is worth more than £2million.

If you’re married or in a civil partnership and you leave your estate to them, your threshold can be added to your partner’s when you die, or vice versa. This means the joint threshold can be as much as £1million. 

There are certain exemptions and reductions, for example if you leave money to charity or if you are passing on ownership of a business.

Tilney points out that, had the £325,000 allowance been adjusted for consumer price index inflation each year, it would now be approximately £414,000 per person.

If inflation continues to rise, the gap between the inheritance tax threshold and the value of people’s estates will grow even wider.  

Dyall added: ‘This is a reminder of the impact of inflation, which has started to rear its head again, evidenced by the latest consumer price index inflation figures out today which rose to 2.1 per cent in May, up from 1.5 per cent in April.’ 

Some are already seeking advice on inheritance tax and what their descendants might have to pay after they have died.  

According to The Openwork Partnership, one of the UK’s largest networks of financial advisers, there was a 38 per cent spike in demand for advice on inheritance tax planning in the past year, with more than one in ten clients wanting to discuss it.

Of these, 43 per cent said rising property prices was one of their reasons for seeking inheritance tax advice.

Antony Cousins, director of wealth management at SPF Private Clients, said his firm had also seen an increase in enquiries on the topic. 

‘Many more people could be hit by inheritance tax, thanks to rising property prices and a freezing of the nil-rate.

‘We have seen a significant increase in enquiries in this area over the past 12 to 24 months, particularly as Covid has made people think more about their mortality.’

He says that there are five main ways that those worried about inheritance tax can reduce their liability: spending significant amounts to reduce their overall estate; gifting money or assets to children and grandchildren; insuring against their inheritance tax liability, for example on a life assurance policy; setting up suitable trusts; and investing in an asset that qualifies for business property relief.

You can claim business property relief on property and buildings, unlisted shares and machinery that are associated with the running of a business, and if eligible the inheritance relief will be between 50 and 100 per cent. 

‘Everyone is different and generally it’s not just one of these solutions which suits best but a combination of these,’ says Cousins. 

‘Given that more people could find themselves hit by inheritance tax, it is important to take advice and to plan ahead.’ 

More older people are seeking advice about inheritance tax, according to experts

More older people are seeking advice about inheritance tax, according to experts

Those with more valuable estates have an extra complication to look out for, as the exemption for passing on your main home to your children tapers away when the deceased’s estate is worth more than £2million.   

Dyall explains: ‘There is an additional trap to consider, which means that some people will pay inheritance tax at an effective rate of 60 per cent on the growth. 

‘If the growth on their home pushes them above £2million, when added to their other assets, then for every £2 they exceed the £2million threshold, they will lose £1 of allowance. 

‘This results in an effective rate of tax of 60 per cent on the growth. So it is important to keep an eye on how the growth in the value of their home is affecting the bigger picture.’ 

How much does the Government make from inheritance tax?

How much does the Government make from inheritance tax? 
Tax year   Government inheritance tax receipts (£billion)
2009/10 £2.38billion
2010/11  £2.72billion 
2011/12  £2.90billion 
2012/13  £3.11billion 
2013/14  £3.40billion 
2014/15  £3.80billion 
2015/16  £4.65billion 
2016/17  £4.82billion 
2017/18  £5.21billion 
2018/19  £5.36billion 
2019/20  £5.12billion 
2020/21  £5.33billion 
Source: HMRC/NFU Mutual  

HMRC has revealed that it collected £5.33billion from inheritance tax in the 2020-21 financial year, up from £5.12billion the year before.

Since the tax-free allowance was raised to £325,000 in 2009, the amount of inheritance tax the Government pockets has more than doubled.  

Meanwhile, the average UK house price has increased by around 60 per cent since 2009, so a £325,000 house would now be worth around £520,000.

Though its income from the tax is on the increase, some experts predict that the Treasury could increase IHT even further as it seeks to recoup funds spent on emergency support related to the Coronavirus pandemic.

Julia Rosenbloom, tax partner at accountants Smith & Williamson, says: ‘Rumours have been swelling since the weekend about a plan by the Chancellor to launch a pensions tax raid in an Autumn Budget. 

‘If it is confirmed that a Budget will be held later this year, then it wouldn’t be unthinkable for lucrative reforms to be considered for other taxes, particularly IHT and capital gains tax, given the amount they raise for the Treasury on an annual basis.

‘If the Chancellor launches a sledgehammer to the tax system in an Autumn Budget and explicitly increases IHT charges then many more people will be affected – and some may need to go as far as selling family homes to pay their IHT bills.’

Cutting your IHT bill: Three tips from Tilney’s Ian Dyall

Pass on your pension

Pensions can play a big role when it comes to estate planning, as they aren’t included when your inheritance tax bill is calculated. 

If you can afford to leave your pension untouched while using other assets to fund your retirement, you could pass your pension on tax-efficiently while gradually reducing the size of your taxable estate.

If you die before you are 75, the person who inherits your pension can make withdrawals without paying any tax. If you die after age 75, the beneficiary will pay tax on withdrawals at their marginal income tax rate. However, access to these pension features is not available on many older pensions.

Make gifts in trusts

Trusts make it possible to give gifts to others while keeping control over the money. Usually when you set up a trust you can choose who receives the gift, when they receive it and what they can use it for. Many people make gifts in trust when the beneficiary is:

  • Too young or inexperienced to look after the money
  • In ill health or has certain disabilities 
  • Going through divorce or bankruptcy proceedings 

You can also use certain trusts to make a gift while still benefiting from the money. For example, you could give away an investment while keeping any income it pays or keep an investment while giving away its growth.

Use tax-efficient investments to benefit from business relief

Under business relief rules, you may be able to reduce the value of your inheritance tax bill by owning or investing in a business. You can claim business relief on:

  • A business or interest in a business (including a sole trade and partnership)
  • Land, buildings or machinery owned by a partner or controlling shareholder of a business and used by the business
  • Unquoted shares, such as those listed on the Alternative Investment Market (AIM) or Enterprise Investment Scheme companies.

You will need to own the assets for at least two years before you can claim business relief on them. 

Some assets become completely free from inheritance tax under these rules, whereas others only receive 50 per cent relief – and there are also several exceptions. In addition, investing in smaller companies can be higher risk. 

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Ireland ‘one of world’s best five places’ to survive global societal collapse

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Ireland is one of the world’s five places best suited to survive a global collapse of society, according to a new study. The others are Iceland, Tasmania, the UK and, topping the list, New Zealand.

The researchers say human civilisation is “in a perilous state” because of the highly interconnected and energy-intensive society that has developed and the environmental damage this has caused.

A collapse could arise from shocks such as a severe financial crisis, the effects of the climate crisis, destruction of nature, an even worse pandemic than Covid-19 or a combination of these, the scientists says.

To assess which nations would be most resilient to such a collapse, countries were ranked according to their ability to grow food for their population, protect their borders from unwanted mass migration, and maintain an electrical grid and some manufacturing ability. Islands in temperate regions and mostly with low population densities have come out on top.

The researchers say their study highlights the factors that nations must improve to increase resilience. They say that a globalised society that prizes economic efficiency has damaged resilience, and that spare capacity needs to exist in food and other vital sectors.

Billionaires have been reported to be buying land for bunkers in New Zealand in preparation for an apocalypse. “We weren’t surprised New Zealand was on our list,” says Prof Aled Jones, at the Global Sustainability Institute, at Anglia Ruskin University, in the UK.

“We chose that you had to be able to protect borders and places had to be temperate. So with hindsight it’s quite obvious that large islands with complex societies on them already” make up the list.

The study, published in the journal Sustainability, says: “The globe-spanning, energy-intensive industrial civilisation that characterises the modern era represents an anomalous situation when it is considered against the majority of human history.”

The study also says that environmental destruction, limited resources and population growth mean civilisation “is in a perilous state, with large and growing risks developing in multiple spheres of the human endeavour”.

New Zealand was found to have the greatest potential to survive relatively unscathed due to its geothermal and hydroelectric energy, abundant agricultural land and low human population density.

Jones says major global food losses, a financial crisis and a pandemic have all happened in recent years, and “we’ve been lucky that things haven’t all happened at the same time – there’s no real reason why they can’t all happen in the same year”.

He adds: “As you start to see these events happening I get more worried, but I also hope we can learn more quickly than we have in the past that resilience is important. With everyone talking about ‘building back better’ from the pandemic, if we don’t lose that momentum I might be more optimistic than I have been in the past.”

He says the coronavirus pandemic has shown that governments can act quickly when needed. “It’s interesting how quickly we can close borders, and how quickly governments can make decisions to change things.”

But, he adds, “This drive for just-in-time, ever-more-efficient economies isn’t the thing you want to do for resilience. We need to build in some slack in the system, so that if there is a shock then you have the ability to respond because you’ve got spare capacity. We need to start thinking about resilience much more in global planning. But, obviously, the ideal thing is that a quick collapse doesn’t happen.” – Guardian

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Couple who bought coach house reveal transformation on George Clarke’s Remarkable Renovations 

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A couple who bought a 19th-century coach house for £284,000 reveal their transformation of the property into a stunning family home on tonight’s episode of George Clarke’s Remarkable Renovations. 

Childhood sweethearts Laura and Adrian, from Staffordshire, sold their own home, moved into a caravan and began renovating the derelict building into an Insta-worthy three bedroom house, with an added granny annex for Adrian’s parents Andrew and Elinor.

The couple, who appear on the Channel 4 programme tonight, initially wanted to renovate the 900 sq ft property within a £350,000 budget. 

But the build was hampered by difficulties from the outset, including delays with planning permission and the Covid-19 crisis, pushing their bill up to £450,000.   

BEFORE: Laura and Adrian, from Staffordshire, reveal their unrecognisable transformation of a 19th-century coach house into a stunning family home on George Clarke's Remarkable Renovations tonight. Pictured, the home property before the build

BEFORE: Laura and Adrian, from Staffordshire, reveal their unrecognisable transformation of a 19th-century coach house into a stunning family home on George Clarke’s Remarkable Renovations tonight. Pictured, the home property before the build

AFTER: At the end of the build the couple unveil their stunning contemporary home which oozes charm and character. The living space blends modern style with traditional features, keeping the building's style alive

AFTER: At the end of the build the couple unveil their stunning contemporary home which oozes charm and character. The living space blends modern style with traditional features, keeping the building’s style alive

BEFORE: Having been used as a coach-house for other people's caravans for the past decade, the building is in poor condition with rotten timbers and mismatched brickwork at the start of the project. Above, a room that becomes the living room

BEFORE: Having been used as a coach-house for other people’s caravans for the past decade, the building is in poor condition with rotten timbers and mismatched brickwork at the start of the project. Above, a room that becomes the living room 

AFTER: The couple went £100,000 over budget on the build after unexpected costs sprung up but were delighted with the final result, including this stylish living room complete with pops of colour and plush furniture

AFTER: The couple went £100,000 over budget on the build after unexpected costs sprung up but were delighted with the final result, including this stylish living room complete with pops of colour and plush furniture 

The property is situated in the grounds of what was the Cliff Hall estate in the village of Kingsbury, near Birmingham.  

When George first met the couple in June 2019, they had already been living in a caravan on the site for 18 months in order to save money.   

Laura, a project manager in forensics, revealed the family have already ‘put a lot of effort’ into the building given it was originally intended to store horses and has been completely empty for 10 years.

Having been used as a coach-house for other people’s caravans for the past decade, the building was in poor condition at the start of the project, with rotten timbers and mismatched brickwork. 

But it was ripe for renovation, with Adrian and Laura seeing it’s potential and pipping a developer to the post to buy it for £284,000. 

KITCHEN BEOFRE: The couple appear on the Channel 4 programme tonight as they reveal their hopes to transform the 900 sq ft property with a budget of just £350,000. Above, one of the derelict rooms with crumbling and uneven floors before

KITCHEN BEOFRE: The couple appear on the Channel 4 programme tonight as they reveal their hopes to transform the 900 sq ft property with a budget of just £350,000. Above, one of the derelict rooms with crumbling and uneven floors before

KITCHEN AFTER: Features including the exposed brick walls and wooden beams add a touch of character to the space, which is otherwise kitted out as a modern home perfect for family living

KITCHEN AFTER: Features including the exposed brick walls and wooden beams add a touch of character to the space, which is otherwise kitted out as a modern home perfect for family living

Laura and Adrian end up living in a caravan on the building site for three years in order to get the project finished - but they insist it has all been worth it

Laura and Adrian end up living in a caravan on the building site for three years in order to get the project finished – but they insist it has all been worth it 

The ground floor had two large spaces, with two small rooms squashed into the middle. Meanwhile upstairs is a wide open space.

Laura and Adrian planned to build a modern timber frame inside the old brick shell, allowing them to configure the space exactly to their needs. They also wanted to build a self-contained two bed annex connected to the main house, where Adrian’s parents Andrew and Elinor will live.

Andrew says: ‘It was one Saturday morning they came up and they bought pictures of this place they’d looked at. 

‘In the past, we considered a wild pipe dream of building  something as a family. They said, “If you sold your house and we sold ours and we steal your pension, we could do this”.’

Meanwhile Elinor jokes: ‘They said can we have your money basically.’

Understandably, the couple have high expectations, Elinor tells George: ‘I’m not compromising on kitchens and bathrooms.’

Meanwhile Andrew, who uses a mobility scooter, says the property will need to be on one level. 

The family carefully stockpiled everything from the demolition of the barn, including over 70,000 bricks, to save money.   

With planning permission finally granted, and the family aimed to get everyone in in 10 months, enlisting local contractors to help. 

They quickly spent £15,000 reinforcing the current foundations and pouring concrete into the building’s floor.    

HALLWAY AFTERWARDS: The stunning space is flooded with light, while Adrian's clever design and craftsmanship brings together contemporary elements with the traditional features of the barn (pictured, the hallway)

HALLWAY AFTERWARDS: The stunning space is flooded with light, while Adrian’s clever design and craftsmanship brings together contemporary elements with the traditional features of the barn (pictured, the hallway) 

However it was not long before they feel their budget dwindling, with Adrian confessing he had to let go of his local builders.

He says: ‘It’s a shame I haven’t got another £50,000 to let the guys crack on. Not at the rate they’re on. The problem was never going to be getting someone to build it, it was going to be me doing as much as I can to get my hands on.’

Meanwhile Laura confesses: ‘We’ve been here so long, it’s like what’s another few months to get it right.’

Two months later, winter arrives in Tamworth and living in a caravan begins to take it’s toll on the family.

Elinor says: ‘Caravan is getting a bit tired now, it’s looking a bit worn. It’d be nice to have space.’

Meanwhile Andrew adds: ‘Things  are going reasonably well, but things are looking a little bit tight. Adrian has been busy – it’s a compromise between how much time he’s at work and being justified to get others in on the budget.’

MASTER BEDROOM AFTERWARDS: The couple build timber beams into the property, creating a stunning barn style master bedroom. The luxurious space is a welcome change after months living in a caravan

MASTER BEDROOM AFTERWARDS: The couple build timber beams into the property, creating a stunning barn style master bedroom. The luxurious space is a welcome change after months living in a caravan

With the budget and schedule slipping, Adrian is doing more and more of the work himself.  

Andrew jokes: ‘Time is a big problem,  we said it would be finished by Christmas…but we didn’t specify which Christmas that would be.’

By February 2020, Laura is also feeling the strain of caravan life – having lived in one for over two years.

She says: ‘It is hard work. these past few months, we’ve really struggled with the weather. It’s the mud more than anything.’

Meanwhile the mother-of-two admits she feels the burden of building a home for her in-laws as well as her own dream property, saying: ‘I’m really lucky, we got on really well anyway but we’re feeling a huge sense of responsibility towards them. Basically they’ve invested everything they’ve got in us and the vision we had.’

She continues: ‘I’ve known Adrian since I was about eight and we’ve been together for 17 years. We lost Adrian’s brother a few years ago and it makes you re-evaluate things and you realise how important it is to have family around you. It puts a different perspective on life. This has bought us closer together for sure.’

One month later, the family were knocked sideways as the pandemic shut the site down. 

The couple ended up spending £100,000 over their initial budget in order to complete the stunning family home for their children and in-laws. Pictured, the dining space leads on from the kitchen and has an industrial-style picnic table

The couple ended up spending £100,000 over their initial budget in order to complete the stunning family home for their children and in-laws. Pictured, the dining space leads on from the kitchen and has an industrial-style picnic table 

Elinor tells the camera: ‘We’re doing okay, it’d be nice to move in. We haven’t all fallen out completely but there’s  been some arguments.’  

Laura and Adrian struggled to get building supplies amid the pandemic, with Laura saying: ‘It’s reordered the schedule of things. Some of the busy jobs we’d been hoping would happen, just haven’t’ been able to.’

By July 2020, the building was finally watertight. But the budget was gone. ‘A family member has managed to lend us £50,000…but there’s only £4,000 of that left,’ Adrian says on the programme.

‘But there is another £10,000 that will get the build done…It’s my mother’s own secret stash that was going to pay for her kitchen just to get the house finished.’

George says there was a ‘massive challenge’ to get the family into the building within two months and admits he is concerned about how much work there is still to be done. 

Meanwhile Laura and Adrian also create cosy single bedrooms for their two sons, which are joined together with a mezzanine for the children to play on (pictured)

Meanwhile Laura and Adrian also create cosy single bedrooms for their two sons, which are joined together with a mezzanine for the children to play on (pictured) 

However two months later, the couple unveiled their stunning contemporary home which oozes charm and character. 

The living space blends modern style with traditional features, keeping the building’s style alive.

Upstairs, the space is divided to give the children their own mirror image bedrooms with a mezzanine between the two.

Meanwhile the gorgeous master bedroom acts as the perfect upgrade from caravan living.

And downstairs, the adjourning annex for Adrian’s parents is an elegant new-build structure connected to the main house with a glazed walkway.

The couple confess the three year long build has been ‘more than worth it’, with Adrian saying: ‘I think we’re going to be around £450,000 build cost. I’ve done it for a reason, I’ve done it for the family. That’s what it’s about.’ 

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Dusty Hill, bassist for rock band ZZ Top, dies aged 72

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Dusty Hill, bassist for rock band ZZ Top, has died at the age of 72.

Hill, who had recently suffered a hip injury, died in his sleep, as confirmed by a statement on Instagram from band-mates Billy Gibbons and Frank Beard.

“We are saddened by the news today that our Compadre, Dusty Hill, has passed away in his sleep at home in Houston, TX,” it read. “We, along with legions of ZZ Top fans around the world, will miss your steadfast presence, your good nature and enduring commitment to providing that monumental bottom to the ‘Top’. We will forever be connected to that ‘Blues Shuffle in C.’ You will be missed greatly, amigo.”

His recent injury had meant that Hill was forced to miss performances as part of the band’s summer tour. There have been no further details on cause of death.

ZZ Top’s first single was released in 1969 after the demise of Moving Sidewalks, the band that Gibbons had previously formed. Their first concert, with Hill included, was in 1970 and the year after their first album was released.

The band would go on to find fame with 15 albums and were best known for hits including 1983’s Gimme All Your Lovin’ and 1984’s Legs. In 1984, Hill also accidentally shot himself, something he remained lighthearted about years later.

“My first reaction was ‘s**t!’ and then ‘ouch!’ ” he said in a 2016 interview. “I couldn’t believe I’d done something so stupid. To this day, I don’t know how I could do it.”

As well as playing bass guitar, Hill also played keyboard and sung backing and lead vocals for the band. They were all inducted into the Rock and Roll Hall of Fame in 2004.

He made appearances in Back to the Future Part III and Deadwood and also played himself in King of the Hill.

“I don’t believe in regrets at all,” Hill also said in 2016. “What’s the point? There are things I’ve done that, if I had my time all over again, I would do differently – or not at all. But I am the sort of person who, once something’s done, just brushes it away and gets on with life.”

Tributes are coming in from the industry, including from Flea who referred to Hill as “a true rocker” and Go-Gos member Kathy Valentine who tweeted that Hill is “a Texas icon”. – Guardian

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