How A New Law Can Save You A Fortune In Inheritance Tax

Gary Green
Gary Green
January 20, 2020

Every year UK families face rising inheritance tax bills. In today's article, we'll explain how a new law could save you a fortune.

Inheritance tax receipts have risen every year this decade. In the 2018-2019 tax year, UK families paid out a whopping £5.4b to the tax man.

Married couples have always been able to offset some of the tax liability (we covered some of the ways in our article on how to simplify your inheritance tax paperwork).

But a proposed new law may allow other "couples " to gain similar tax benefits.

Married Couples, Civil Partnerships And IHT

Married couples can currently take advantage of IHT tax breaks when one of them dies. You are allowed to pass your assets to your husband or wife tax-free.

This, in effect, doubles your allowance.

It also means that the surviving member of a married couple will never be forced to sell the shared home because of an IHT bill.

This law also applies to civil partnerships. Same sex and opposite sex civil partners can utilise the same IHT protection when one of them dies.

Siblings And IHT

Unfortunately for cohabiting siblings, the current IHT laws do not apply in their case. If, for example, two sisters live together and one of them dies, the surviving sister would have to pay IHT on the value of their home.

In cases when the price of the home has risen significantly since purchase, this can even result in needing to sell the house to pay the bill.

Cohabiting siblings have been challenging the unfairness of this situation for years. In 2008, sisters Joyce and Sybil Burden complained to the European Court of Human Rights that they were being discriminated against (compared to how they would be treated if they were married).

Back then, the ECHR ruled that they had no case. Siblings (unlike married couples) don't sign a legal document. Hence, they are not allowed to pass assets tax-free.

A New Law?

MPs and members of the House of Lords have been considering the situation for the last few years. Finally, it seems, there might be some hope for cohabiting siblings.

Lord Lexden introduced a bill last week that would allow the tax breaks on death duties to extend to siblings. Some people have pushed for an even more sweeping change, which would allow siblings to actually enter into civil partnerships with each other.

Not everyone is in favour. Some of the arguments against the bill:

  • It could lead to coercion, eg if one sibling wanted to move out but was pressured to stay for tax purposes.
  • It could be seen as unfair to other siblings in the family who don't happen to live in the shared home.
  • Unlike marriages or civil partnerships, sibling relationships are not legal arrangements and cannot be "ended".

We'll certainly be keeping an eye on the progress of the bill. Whatever happens, we'll keep you informed and up to date. If there are any new ways to streamline or minimise your inheritance tax situation, you'll read about them here!

If you think you might be affected by anything discussed in this article, and you'd like to talk to one of our tax experts, please get in touch.

Interested in our services?
Fill in your details and a member of our experienced team will be in touch shortly to discuss your needs.
Contact Form Demo (#1)
We adhere to strict GDPR rules and do not reveal or sell your data to any third-parties. For more, please read our Privacy Policy.
Latest Insights
October 23, 2023
PAYE Investigations

Dive into the world of PAYE investigations. Uncover the facts, implications, and insights in this informative blog

September 29, 2023
London-based accountancy business acquired by Key Business Consultants

Exciting Merger Alert: London's Reed Taylor Benedict & Benedict Leff Accountants Acquired by Key Business Consultants.

September 18, 2023
Tax Tribunals – An Overview

Dive into the realm of Tax Tribunals: A comprehensive overview shedding light on this crucial aspect of taxation.

September 2, 2023
What Is A COP8?

Learn about COP8, a tax-related Code of Practice issued by HMRC for suspected tax avoidance cases. Discover when COP8s are used and the penalties associated with them.

August 20, 2023
HMRC Compliance Checks

Navigate the complexities of HMRC compliance checks confidently. Our comprehensive guide covers everything you need to know about handling tax inspections and more.

August 6, 2023
Tax Evasion and Tax Fraud

Untangling the complexities of tax evasion and fraud. Delve into our comprehensive guide to understand the differences, consequences, and preventive measures.

June 18, 2023
Which Jobs In The UK Have The Best Salary Growth Potential?

Explore the top UK jobs with the highest salary growth potential. Uncover promising career paths and industries that offer substantial earning potential.

May 23, 2023
How To File Dormant Accounts Through Companies House

Learn the step-by-step process of filing dormant accounts through Companies House with our comprehensive guide.

May 19, 2023
Customs Declaration Service (CDS) and VAT

Discover how the Customs Declaration Service (CDS) and VAT intertwine in this insightful blog article.

View Our latest insights »
Get the latest UK tax & business news and guidance delivered straight to your inbox
Newsletter Form (#2)
We care about the protection of your data. No spam. Unsubscribe anytime.
Copyright © 2022 Key Business Consultants LLP. Reg: E&W OC389322
linkedin facebook pinterest youtube rss twitter instagram facebook-blank rss-blank linkedin-blank pinterest youtube twitter instagram