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The Times has reported that one in five people aged 65 and over has a total household wealth of more than £1,000,000. On reflection perhaps this doesn’t seem that surprising given the rise in the value of pension funds and residential property over the last few decades.Perhaps the clearest consequence of rising wealth amongst pensioners is that more and more have estates in excess of the available reliefs from inheritance tax on death. For married pensioners who leave their wealth to their spouse on death, the surviving spouse can leave up to £650,000 on their subsequent death free from inheritance tax (by using their and their spouse’s respective nil rate bands). If their wealth is under £2,000,000 each on death then they may also take advantage of the residence nil rate band, which provides an additional slice of inheritance tax relief if they leave all or part of a residential property to their children or further descendants. Taking all of this into account, it is possible for parents to leave up to £1,000,000 between them to their children and further descendants tax free.One way in which the Government could have sought to address the issue of increasing inheritance tax exposure for the middle classes would have been to raise the nil rate band allowance from the current threshold of £325,000, which has stayed level since 2009. In previous years the threshold rose each financial year, similar to the income tax and capital gains tax personal allowances. The residence nil rate band is a much narrower exemption which only applies in certain circumstances and so cannot be considered a like-for-like substitute.For those concerned about their future tax bill and/or those looking to pass wealth down to younger generations there are a number of tax-efficient methods for doing so. The UK rules on lifetime giving permit individuals to make unlimited tax-free gifts, provided the donor survives those gifts by seven years. On top of this individuals can make up to £3,000 of gifts each financial year free from inheritance tax (whether or not they survive seven years), as well as taking advantage of other specific exemptions, such as gifts to newly-weds for their wedding. Gifts that are made out of an individual’s surplus income each year can also be made tax free, although care should be taken over the definitions of both ‘surplus’ and ‘income’.Finally, rising wealth should be a reminder that preparing a Will should be seen as a high priority for all individuals. As a minimum Wills provide individuals with the peace of mind that their affairs will be properly administered after their death in accordance with their wishes. However, for those facing a potential tax bill on death, a Will is the key to unlocking the potential tax savings by directing wealth to those recipients which attract the highest savings.

“Lucky that I love a foreign land for, the lucky fact of your existence”.  Unfortunately despite the very catchy lyrics of Shakira’s 2001 hit, the Spanish Revenue are arguing that she did not in fact love a foreign land enough, and she was in fact resident in Barcelona rather than in the Bahamas, as claimed.”I ain’t guilty it’s a musical transaction”.  Being resident in Spain has similar consequences to being resident in the UK in that (unless you are able to benefit from the remittance basis of taxation) you are subject to tax on your worldwide income, hence why the Spanish Revenue are claiming Shakira owes them £13 million in taxes.Rather than being a “Beautiful Liar” (I promise no more Shakira lyrics) it may be the case that Shakira misunderstood the residency rules in Spain, or miscounted her days.  The UK laws on residency are fairly clear cut, but unless you are automatically resident ensuring residency (or not) relies on counting days in the country, and for international pop stars who travel a lot for work, it can be difficult to keep track of how many days have been spent where.As the article mentions, this is only one of a number of high profile tax cases in Spain in recent times, which should hopefully serve as a lesson to all of us (not just footballers and popstars) to constantly review our arrangements to ensure compliance with relevant laws.

Although the increase in probate fees to £6,000 for those estates worth more than £2,000,000 will understandably grab the headlines, the underlying policy contains more detail which should not be ignored.Firstly it is worth remembering that this highest band is a significant reduction on the £20,000 band proposed in 2017. Secondly the government has confirmed that the threshold under which no fees are paid at all is being raised from £5,000 to £50,000. Although the government projects that about 80% of applicants will pay £750 or less, this is still a significant increase on the previous fee of £215 (or £155 for those applying through a solicitor).However, many of the issues which were raised last year still remain. The greatest concern for a number of executors will be how to gain access to sufficient assets to pay the fee without a grant of probate. For those wealthy estates which pass entirely under the spouse exemption, liquidity has historically been less of an issue because no inheritance tax is due. Once the new rules are introduced however this will add an additional layer of complexity for executors to wrangle with.

The inheritance tax nil rate band has been frozen at £325,000 since April 2009 and the Government appears to have no plans to increase this threshold in the near future. When the increase in house prices in London and the South East is compared over this time period it is small wonder that so many estates are now subject to inheritance tax.The Government did introduce the new residence nil rate band in April 2017, which provides parents with an additional slice of inheritance tax relief if they leave all or part of a residential property to their children or further descendants. This was designed so that parents could leave up to £1,000,000 between them to their children tax free.However, this additional slice begins to taper off once an individual’s net wealth exceeds £2,000,000, meaning that parents whose combined net worth exceeds £4,000,000 will lose the right to claim some or all of the relief. For many families in London and the South East the family home represents a significant proportion of this figure, which does not leave much room before the residence nil rate band is lost. The relief also only applies if assets are left directly on death, meaning that individuals with certain Wills (for example where assets are left on a discretionary trust and not appointed out within two years) will miss out on the residence nil rate band completely.It will be interesting to see how the figures for 2017/18 compare to the figures in this article in due course once the residence nil rate band is taken into account.

Citywire has commented on the Court of Appeal decision of HMRC v Parry & Ors where the appellant argued that a lifetime pension scheme transfer was not a transfer of value for Inheritance Tax purposes. HMRC won on the contention that it was.The Court of Appeal also agreed with HMRC’s assertion that the failure by the pension saver to take lifetime income benefits at a time when she was in ill health, specifically the late stages of a terminal illness, was a further ‘disposition’ under the Inheritance Tax Act and therefore a separate Inheritance Tax charge arose.Pensions are a very useful tool in the estate planning arsenal, however this case demonstrates the care that must be taken when reviewing existing provision and before any changes are made. Further, timely planning is key as ill-health may eliminate the possibility of a tax-efficient transfer into another scheme.

Whilst the focus on today’s news should of course be on congratulating the happy parents-to-be, it is also a good opportunity to consider the impact of mixed domicile marriages on estate planning.The question of Megan’s domicile remains an open one, depending on the extent to which one considers marrying into the Royal Family an intention to be closely connected to the United Kingdom. Whilst their children will be UK domiciled under UK law (because, generally speaking, domicile of origin reflects the domicile of the father), Megan could find herself with a different domicile to that of her children.For couple in a similar scenario, this can have a significant impact on estate planning opportunities, for example UK domiciled spouses only have a limited spouse exemption when passing assets to their non-UK domiciled spouse. It may also mean navigating the choppy waters of double taxation relief as more than one jurisdiction seeks to claim taxing rights over the same assets.One expects that the couple will not be lacking in professional advisors however. It is also worth remembering as well that Megan will become deemed UK domiciled for IHT (as well as all other UK taxes) after she has been resident for 15 out of the last 20 UK tax years. This will cause many of the UK estate planning complexities to fall away, albeit that it may bring with it a host of other matters to consider.

The fact that nearly seven million parents have given children an early inheritance shows that lifetime estate planning is not something which is restricted to the high-net worth and ultra-high net worth community.Assisting children to get onto the property ladder and supporting grandchildren through education and university are two of the most common reasons for passing wealth down through the generations.Independent financial and legal advice should be sought before carrying out any significant estate planning, however this research shows that it is a financial tool that is harnessed by millions and could surely be used by more than that.

The Financial Times reports this morning that HMRC are enquiring into the tax affairs of Airbnb. Of particular interest to HMRC may be the low profits as against high revenues, something which was criticised last year by Bruno Le Maire, the French Finance Minister.The investigation serves as a timely reminder to those that use the service to rent their rooms or entire homes in the UK, to ensure they are declaring the income generated and paying the appropriate tax.Rent-a-room relief is set at £7,500 per year so those earning under this amount (or half if the income is shared with another person) on Airbnb do not need to file a return. Landlords who do not live in the home they rent out do not qualify for the relief.For those that are unable to claim the relief, or that earn over the threshold, a tax return must be filed.  Some may wish to consider whether their tax liability is lower by claiming the relief, or by being able to deduct expenses in the usual manner, something which is not available under the rent-a-room scheme. As the popularity of Airbnb rises, HMRC may continue to take an interest in the tax revenue taken and therefore ensuring compliance with the rules will only become increasingly important for users of the service.

Some people are using the extension of the civil partnership rules to heterosexual couples as an opportunity to highlight the ways in which the rules on inheritance tax (“IHT”) favour married couples (or those in civil partnerships).Whilst it seems unlikely at this stage that the Government will submit to calls to allow siblings similar access to these IHT exemptions, it does raise the interesting ethical question about why avoiding IHT continues to be so closely linked to marriage or civil partnerships. The argument that it is to preserve family wealth does not hold, because IHT is taxed at 40% when the surviving spouse does eventually pass wealth down to children. Indeed, a married couple receives the exemption whether or not they have children, whereas a different individual may wish to pass assets to a loved niece or nephew via their own sibling. In the former scenario IHT is only taxed once (on the death of the surviving spouse), whereas in the second scenario HMRC takes a 40% cut twice.Given that the exemption simply requires that individuals be married or in a civil partnership, it begs the question of what the justification is for the continued generosity towards couples in the 21st century.

The Association of Taxation Technicians have warned individuals of the approaching time limit to register for self-assessment for the first time, specifically reminding people that profits and gains made on cryptoassets will need to be disclosed and tax may be due.It is also worth considering whether losses could be reported to mitigate tax paid on other income or gains.Individuals will need to consider (and HMRC will presumably be very interested to know) whether they are trading or investing in cryptoassets, the former being subject to income tax rather than capital gains tax and therefore taxed at a much higher rate.Given the increase in value of cryptoassets and their popularity in recent years, it will be interesting to see how much revenue HMRC make from cryptoasset taxation and what active steps they may take to ensure compliance if they believe there is a under-reporting of liabilities.