Legacy planning after the autumn Budget

When someone passes away, inheritance tax (IHT) is a tax payable on the value of their assets. These assets are collectively known as their estate.

Most people don’t believe they have any assets, but an estate can include many things, such as:

• Houses/land
• Cars
• Bank accounts
• Cash
• Shares
• Businesses
• Phones and computers
• Clothing and jewellery
• Furniture and paintings
• Any other items of value.

Any asset that someone gifts in the last seven years before their death will also be included in the estate, subject to certain exemptions.

What are the exemptions for IHT?

Inheritance tax is payable at 40%. Some assets will also bear income tax and capital gains tax.

However, once the estate is valued, the first £325,000 is tax free.

If a person leaves their assets to a spouse or civil partner, there’s no inheritance tax to pay.

If a house is passed down in the Will to a dependent (child/grandchildren) then a further £175,000 of the value of the house is taxed at 0% (but only if the estate is worth under £2,000,000).

Currently, if an estate includes agricultural land or a business, reliefs are applied to the value of these assets leaving either no inheritance tax payable or a reduced amount.  

And at the moment, most private pensions are also not included in the value of the estate. This allows a person to nominate a beneficiary of their pension pot without it being subject to inheritance tax.

So what’s changing?

Chancellor Rachel Reeves' autumn Budget has removed or adapted some of the benefits for certain assets. Some of these changes will be phased in over the next few years.

This will mean if you own agricultural land or a business, these assets may now attract inheritance tax.

Pensions will also be added to the value of the estate and, in some circumstances, will also attract inheritance tax.

If you leave more than 10% of your estate to charity, this reduces your overall tax liability from 40% to 36% - meaning more of your assets can pass to your chosen beneficiaries.

Have gifts to charities been affected?

Thankfully, the Budget has not made any changes to the tax-saving tool for leaving gifts to charity. If you leave a gift to a charity, like the ROS, in your Will, the value of the gift will not be subject to inheritance tax.

Plus, if you leave more than 10% of your estate to charity, this reduces your overall tax liability from 40% to 36% - meaning more of your assets can pass to your chosen beneficiaries.

What gifts can you make?

Making a Will can seem quite daunting but if you don’t have one in place, the Government will decide who inherits your estate.

There are various types of gift that you can include in your Will:

• Pecuniary gifts - gifts of money, such as £100 or more.
• Specific gifts - specific items such as a watch, house, or car.
• Residuary gifts - the residue of your estate consists of all other assets that are not given away in the Will.

It’s also possible to put a trust in your Will. However, these can attract further trust taxes.

How your gifts make a difference

Did you know that a third of our work is funded by the generous gifts that people leave us in their Will?

These important gifts help us continue…

• funding research to improve the lives of people living with osteoporosis and - one day - find a cure.
• training healthcare professionals so everyone with osteoporosis receives the care they deserve.
• being there for anyone needing information and support, for generations to come.

Jackie’s story

After receiving support from the ROS for over 20 years, Jackie wanted to leave us a gift in her Will, so we could continue our life-changing work.

Write your Will for free

We’ve teamed up with the National Free Wills Network to offer you a free, simple solicitor-written Will.

Get your free Will in three simple steps:

1. Request your information pack.
2. Receive your pack from the National Free Wills Network, which includes a step-by-step guide and a list of Network solicitors near you.
3. Choose a solicitor and make an appointment to write or update your Will for free.

Alternatively, if you’d like to find out more, contact our Legacy Manager Susan on 01761 473137 or email legacy@theros.org.uk

Disclaimer – this article is for information only and is not intended to be construed as individual legal advice.