Everything you need to know as HMRC ‘two-year rule’ ‘risks double tax’ | Personal Finance | Finance

Need to know: Inheritance tax mistakes costing families hundreds of thousands

• Inheritance tax specialist Laura Rumsey is warning families that simple planning mistakes could cost them hundreds of thousands of pounds.
• She explained that people often draft wills without considering inheritance tax implications, a “critical oversight” as HMRC can claim up to 40% of an entire estate. The payment is typically required before relatives can access bank accounts or property, leaving grieving families scrambling to raise substantial sums.
• “I regularly see families caught out by the same avoidable mistakes,” said Rumsey from solicitors Rogers and Norton. “These are not complex loopholes; they are straightforward steps that many people just don’t realise they need to take.”
• Unmarried couples face particular risks, with an unmarried partner potentially facing a £70,000 tax bill on a £500,000 estate. Marriage provides spousal exemption, allowing couples to transfer up to £1 million tax-free when properly planned.
• Families can claim an additional £175,000 each when leaving property to children, potentially creating £1 million in combined tax-free allowances. Without proper planning, families risk losing significant portions of this allowance.
• Deeds of variation offer another solution, allowing beneficiaries to redirect inheritances up to two years after death. “These legal documents allow adult beneficiaries to change the distribution of their inheritance to other people, usually their children,” Rumsey explained.
• For families willing to seek professional guidance, that two-year window could deliver considerable financial advantages.

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