For anyone who dies on or after the 1st of January 2022, Inheritance Tax reporting requirements are simplified for both low value and exempt estates. The Office for Tax Simplification made this recommendation and HMRC has adopted it ...
An estate is classed as low value when:
- the gross value is less than the £325,000 nil-rate threshold
- any assets held in trust don't exceed £150,000 in a single trust
- specified transfers of gifts, shares, land or personal possessions do not exceed £150,000
- the deceased made no gifts with reservation
Estates are classed as exempt when there is no Inheritance Tax due as the gross value doesn't exceed £1m and with exemptions for a spouse, civil partner or charity, the estate value stays within the nil rate band.
These changes mean that more estates will fall into the excepted estates threshold so the shorter IHT205 form can be used by executors. For a low-value estate, trust assets and specified transfers up to 7-years before death has been increased to £250,000 and for exempt estates, the gross value moves to £3, with property in a single settlement increasing to £1m subject to certain conditions. The transfer limit is also increasing to £250,000.
In addition to the thresholds being extended, the requirement of the full transferable nil-rate band being available on second death will be removed. This means reporting requirements will be reduced for 90% of non-taxpaying estates.
I strongly advise IHT forms are completed, especially where one partner in a marriage or civil partnership dies so you have this useful information available on the death of the second partner, maybe some years later.
If you'd like to find out more about anything I've written here, do call me on 01908 774323 or leave a comment below and let's see how I can help you.