Over recent years, there have been several changes to the way in which Inheritance Tax (IHT) is chargeable.  In 2004 Pre Owned Asset Tax was introduced to charge to Income Tax the rental value of gifted property in which the Donor continues to enjoy an interest.  In 2006, the taxation of trusts, including trusts established to give a surviving co-habitee the right to live in property and legacies held in trust for minor grandchildren, was altered.  The implication of these changes on previous gifts and existing Wills should now be reviewed.

In October 2007 it was announced that the Inheritance Tax free allowance (currently £312,000) can be carried forward and added to the allowances available on the death of the surviving spouse or civil partner.  Co-habitees, whose total assets exceed the value of £312,000 should consider entering into a Marriage or Civil Partnership to claim entitlement to this new relief.  Such action will revoke existing Wills which should be reviewed.

Opportunities have also arisen under the new legislation for a couple who are married or in a civil partnership, one or both of whom is a widow or widower to use any portion of the tax free allowance that was not used by the deceased partner.  This additional allowance will be lost if a party to the current marriage or civil partnership leaves his or her estate to the surviving partner.  Skillfully drawn Wills can ensure that allowances to the total value of £936,000 or even £1,248,000 can be utilized.

Use can still be made of annual allowances, the rates of which have not changed for many years.  Every individual can gift £3,000 in each tax year and any unused allowance from the previous year can be additionally used.  An individual can also make any number of small gifts which do not exceed £250 per recipient in each tax year and allowances can be used in relation to gifts made on the occasion of a marriage.