The accountancy profession’s governing body, the ICAEW, have branded HMRC’s new guidelines on how inheritance tax (IHT) will affect people looking to downsize whilst keeping the value of their previous residence as ‘impenetrable’.
The ICAEW said the need to take professional advice when looking to make a move to a smaller home and boost your personal assets in the process is now more vital than ever, even if the end game is ultimately just to pass those assets onto family members.
In its response to the new regulations the ICAEW said:
“The downsizing rules are complicated. … This guide explains the basic rules, but it can’t cover the more complex situations, for example, where trusts are involved. You might want to get professional advice about how to work out the additional threshold in these situations.”
“The policy design is extremely complex and will force many lay executors to engage professional help in what should have been a simple estate passing to children.”
However the ICAEW’s statement was a little more pointed than just providing a promotional push for their members and, perhaps, even more pointed than HMRC would have liked.
The professional body brands the new guidance - ‘How downsizing, selling, or gifting a home affects the additional Inheritance Tax threshold’ - as “only slightly less impenetrable than the legislation itself”. They have also claimed that once you add in other potential factors such as estates valued at over £2m the nil rate band and the transferable nil rate band have been “ignored” completely by HMRC.
As with every aspect of personal tax and inheritance planning, the best way to make sure you do the right thing for your and your family’s future is to take professional advice so you are compliant with current legislation and able to take full advantage of all of the tax reliefs available to you.