UK Inheritance Tax Loophole Spells Big Savings

by Amanda Banks, Tax-News.com, London

30 October 2001

According to a leading broker in north east Britain, there is an inheritance tax loophole that could save beneficiaries in wills millions of pounds each year. Bell Lawrie White's senior director in Aberdeen, Norman Law, told the finance-uk news service: 'Increasingly, people who pass away leave large estates to their next of kin but many beneficiaries end up paying tens of thousands of pounds to the Government in inheritance tax. However, there is a way of claiming this money back and now is the perfect time.'

Over the past year the value of shares has fallen dramatically which can allow the executors of the deceased's estate to sell their shareholdings and then claim back the inheritance tax from the Inland Revenue. Mr Law explained: 'Marconi is a good example. If someone had owned 10,000 shares in the telecoms giant and died when the share price hit this year's high of £7.85 in January 2001, this shareholding would have been valued at £78,500.'

He added: 'With inheritance tax then standing at 40 per cent on all estates over £234,000 (now £242,000 for the tax year 2001-2002), that person would have paid £31,400 in tax to the Inland Revenue, assuming the remainder of their estate was valued at over the inheritance tax threshold. If the will-executor now sold that shareholding at the current price of around 32p, they would realise just £32,000. But, as long as they sell within 12 months of death, they can claim relief on the inheritance tax they have already paid to the Government, in this case £30,120 (£78,500 - £3200 x 40 per cent).'

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