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CORONAVIRUS: TAX AND ESTATE PLANNING

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CORONAVIRUS:

 TAX 

AND ESTATE PLANNING 

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Tax and

estate planning

TIPS FOR PRIVATE

CLIENTS DURING

CORONAVIRUS

Even with the successful rollout of the vaccine programme, it is likely that social distancing and various restrictions will be with us for some time.

Being at home for extended periods during the coronavirus lockdowns has afforded us the opportunity to attend to those tasks we may have been putting off.  With this in mind, we have put together a helpful list of the important tax and estate planning tips you should be thinking about during and in the aftermath of the coronavirus pandemic:

1. review your will

We list this first since it is probably the most important item on your “to-do” list. You should regularly review your Will to check that it is up to date and reflects your wishes. We generally recommend that clients review their Wills every 3 to 5 years, or as and when significant life events occur (e.g. marriage, the birth of children/grandchildren etc.) and update them as necessary. If you don’t yet have a Will, it is now more important than ever to put this in place. The government has introduced temporary legislation in England and Wales which allows for Wills to be witnessed remotely. These changes have been backdated to 31 January 2020, meaning that any Will witnessed virtually at the height of the pandemic will still be valid.

 

If executing a Will using video witnessing, you should ensure that your witnesses have a clear line of sight of each other and you at each stage of the signing process. Pre-recorded videos of the Will signing will not be acceptable and the process must be carried out ‘live’.  Nevertheless, Wills can still adequately be signed in the presence of two independent witnesses by observing the social distancing rules. In other words, ensuring that everyone keeps a safe two metres distance from each other and that they bring their own pen!

 

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tax and

estate planning

2. MAKE SOME GIFTS

If you are minded to make some gifts, now could be an ideal time to review your assets and make those gifts since there are Capital Gains Tax (CGT) and Inheritance Tax (IHT) advantages in doing so.

Making a gift is a disposal for CGT purposes. Any gain (or loss) on the asset is assessed at the time of the gift and may trigger a CGT charge. 

The Chancellor resisted the temptation to increase CGT rates in the Budget – a move that had been widely feared (and given cover in the OBR’s CGT Review published in 2020).  There was also no sign of a consultation on possible reforms to CGT or Inheritance Tax, which will be a great relief to more wealthy taxpayers.

The current rates of CGTs therefore remain the same as before, with higher rate taxpayers paying 28% on gains from residential property and 20% on gains on everything else. The current CGT tax-free annual allowance is £12,300, and this remains frozen for the 2021/22 tax year. With the value of assets at their lowest for some time, now would be a good time to review current market values and see what assets you can gift with little or no CGT to pay.   

____-If you hold any assets that are currently worth less than you paid for them originally, then it is possible to gift these assets without any CGT charge. 

For IHT purposes, any gifts are Potentially Exempt Transfers (PETs).  Provided you survive any gifts by seven years, the gifts will fall out of account completely for IHT purposes. If you die within that seven year window, any gifts which you have made above the nil rate band threshold in the seven years prior to death are clawed back into your estate on death and potentially subject to IHT. Taper Relief can apply to reduce the rate of IHT if a gift is survived between three to seven years.

Importantly, it is the market value of the gift at the time when it was made, and not the date of death, which is assessed for IHT.  Although market values have recovered since the lows of March 2020, if assets you hold are still trading below pre-pandemic levels then you could take advantage of this to gift assets as tax efficiently as possible.   

   

"putting in place robust

tax and estate planning

can help give individuals

peace of mind during

these unprecedented

times"

Peter Daniel, Head of Private Wealth

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tax and

estate planning

3. review your pension

Every taxpayer earning up to £150,000 has an annual allowance of £40,000 which they can contribute tax-free to their pension. Any unused annual allowance can be carried forward up to three years to top up the allowance available in the current year.

You may have noticed that your expenditure has reduced over the past year as a result of minimal spending on restaurants, theatre trips and travel as the nation was in various stages of lockdown restrictions. Now would be a good time to review your pension contributions and top up your pension pot tax-efficiently where possible, including using carry forward relief to top up your current pension allowance. 

 

4. Put Lasting Powers of

Attorney (LPAs) in place

Lasting powers of attorney (LPAs) are a mechanism by which you are able to confer on another person, known as your ‘attorney’, the authority to make decisions about your health and welfare and/or your property and financial affairs in circumstances where you no longer have the mental capacity to make such decisions on your own. If you to lose capacity to make health and welfare decisions for yourself, then in the absence of an appropriate LPA, other people would have to make those decisions on your behalf, for example medical staff or Social Services. An LPA gives you control over your affairs by specifying who you would like to make those decisions – ideally this will be someone who knows your wishes and will act accordingly.  

____-The Chancellor has frozen the lifetime pension allowance at its current level of £1,073,100 for the next five years. However, pension tax relief rates on pension contributions have remained unchanged at 20% for basic rate taxpayers and 40% for higher rate taxpayers. If you are approaching the lifetime allowance level then you should consider your options as to how to save for your retirement in the most tax efficient way, given the punitive tax charges on pension amounts in excess of the lifetime allowance.  

Also, it is important to ensure that you regularly review your pension nomination to ensure that it is up to date and takes into account the fact that it can be very efficient to pass your pension pot down a generation or two.  

   

      LPAs also avoid delays that have financial implications.  If you were to lose capacity and not have an LPA in place, your assets may be effectively frozen and no-one would have immediate authority to deal with them. This also applies to many jointly owned assets. Someone, most likely a family member, would have to apply to court to act as your deputy, an application that can take many months and be costly. 

LPAs are also of significance in protecting the interests of business owners and their organisations in the event of incapacity. If you don’t already have LPAs in place, now is a good time to remedy that.

   

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tax and

estate planning

5. REVIEW YOUR

INVESTMENTS

As we have already mentioned, the current economic environment is uncertain and asset prices are volatile.  Now is a good time to speak with your financial advisor and review your investment portfolio. The good progress of the vaccine rollout in the UK means that the economy

is expected to recover quicker than expected, and this could make some investments more attractive compared to the previous economic outlook. 

 

GET IN TOUCH

james cook

Partner

Tax and Estate Planning

+44 20 7468 7251 +44 7947 532159 james.cook@ collyerbristow.com

peter daniel

Partner and Head of Private Wealth Tax and Estate Planning

+44 20 7468 7351 +44 7879 842645 peter.daniel@ collyerbristow.com

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For more information please visit

collyerbristow.com/private-wealth

collyerbristow.com @collyer_bristow collyer-bristow-llp

D i s c l a i m e r :   The information and opinions contained in this document are for general interest and information purposes only and are not intended to constitute s p e c i f i c l e g a l , c o m m e r c i a l o r o t h e r p r o f e s s i o n a l a d v i c e . I t s h o u l d n o t b e r e l i e d o n o r t r e a t e d a s a s u b s t i t u t e f o r s p e c i f i c a d v i c e r e l e v a n t t o p a r t i c u l a r c i r c u m s t a n c e s , W h i l e w e s e e k t o e n s u r e t h a t t h e c o n t e n t s a r e n o t m i s l e a d i n g o r o u t d a t e d , y o u s h o u l d o b t a i n s p e c i f i c l e g a l a d v i c e b e f o r e m a k i n g o r r e f r a i n i n g f r o m m a k i n g a n y b u s i n e s s o r p e r s o n a l d e c i s i o n s . C o l l y e r B r i s t o w L L P i s a l i m i t e d l i a b i l i t y p a r t n e r s h i p r e g i s t e r e d i n E n g l a n d u n d e r n u m b e r O C 3 1 8 5 3 2 , r e g i s t e r e d o f f i c e 1 4 0 B r o m p t o n R o a d , K n i g h t s b r i d g e , L o n d o n , S W 3 1 H Y , a n d i s a u t h o r i s e d a n d r e g u l a t e d b y t h e S o l i c i t o r s R e g u l a t i o n A u t h o r i t y . A n y r e f e r e n c e t o a p a r t n e r m e a n s a m e m b e r o f t h e L L P o r a n e m p l o y e e w i t h e q u i v a l e n t s t a n d i n g a n d q u a l i f i c a t i o n s . A l i s t o f t h e m e m b e r s i s a v a i l a b l e f o r i n s p e c t i o n a t t h e a b o v e a d d r e s s . T h i s f i r m m a i n t a i n s p r o f e s s i o n a l indemnity insurance in accordance with the rules of the Solicitors Regulation Authority. © 2 0 2 1 C o l l y e r B r i s t o w L L P .

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