Date Published: 07/02/2020 14:36
At the moment, siblings who are cohabiting are not exempt from paying Inheritance Tax (IHT) on money or property left to them. But could that soon change?
Only those who are married or who are registered civil partners are exempt from paying inheritance tax (IHT) on money or property left to them by their spouse. This was expanded to include heterosexual civil partnerships at the end of 2019.
But the law does not cover siblings who are cohabiting. They are liable to pay the standard IHT rate of 40% of anything over the £325,000 threshold.
To solve this unfair situation, Lord Lexden has brought a new Bill to the House of Lords. Under the new proposals, siblings would be exempt from paying IHT on property left to each other, provided they had lived together for at least seven years and that the surviving sibling was over 30. As well as brothers and sisters, the law would also apply to half brothers and sisters and be valid in all parts of the UK.
But some people feel the proposed changes do not go far enough. The new law still wouldn’t provide any protection for couples who are living together but are not married or in a civil partnership. Cohabiting couples do not have any rights to their home on the death of their partner. The UK is way behind other countries with this legislation.
A change to the law for cohabiting siblings in terms of IHT will inevitably raise questions as to where the line is drawn. Other platonic couples, such as parents and children, or friends who own a property together, may also want to be considered. The rules will also have to be watertight enough to prevent the system being abused.
If you want to understand more about Inheritance Tax, or would like to review your IHT liability, do not hesitate to get in touch with us.
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