Falling property prices could mean an unexpected inheritance tax (IHT) reprieve.
If a property is sold at a value lower than the one that was used to calculate an inheritance tax liability, it could be possible for the executor of the estate to reclaim some of the tax paid, says accountancy firm Saffery Champness. But a claim must be made within four years of the death of the person leaving the house in their will.
"It is possible that in some parts of the country, house prices might fall significantly compared to their value over the last four years," says Ronnie Ludwig from the firm. "As long as certain requirements are met, the 40 per cent tax paid on the difference could be clawed back.
"Anyone who finds themselves in this _position in the coming months should contact the executor, who will be required to make the claim."
Meanwhile, changes to the tax announced by the Chancellor Alistair Darling kick in at the end of this tax year in April. Amendments include a rise in the IHT-exempt allowance for married couples. Previously, one spouse could pass on property and assets without any IHT being due, but often when the surviving spouse died, their estate would be large enough to attract an IHT bill when left to family or friends. In April, the surviving spouse can leave any amount up to a limit of £600,000 without paying IHT. This has major implications for estate planning.
But 85 per cent of people are oblivious to the changes, according to research by Friends Provident, and just 8 per cent are aware that civil partnership couples share the same cut-off point. More than 27 million Britons – 61 per cent of women and 53 per cent of men – have no idea what IHT is or how to plan for it.Reuse content