Like many other classic British eccentricities, our tax year begins on the 6th April, every year. And each new tax year, alongside changes announced within the Spring Budget the month prior, means it’s the ideal time to reassess your estate, and put plans in place to maximise any opportunities on offer.
But before we go into the importance of Inheritance Tax (IHT) planning, here’s a little background on why the 6th April isn’t a random or arbitrary date, but is in fact steeped in British history.
Why the 6th April?
The Gregorian Calendar, named after its instigator Pope Gregory XIII, was introduced to solve the ‘wild inaccuracy’ of the Julian Calendar – wildly inaccurate because it differed from the solar year by a whole 11.5 minutes. What Pope Gregory was actually annoyed at, was that Easter was falling later each year, further and further away from the ‘Vernal Equinox’, on which its timing each year was based.
But whilst his calendar was introduced across much of Europe in 1582, we in the UK didn’t adopt it until 1752 – and by that point we were a whole 11 days off the rest of Europe. In a world where travel, and more importantly international trade, was becoming increasingly common – change was needed to bring our dates in line with the wider world.
Prior to Britain adopting the Gregorian Calendar, the first day of the new year was 25th March, otherwise known as Lady’s Day. That first Gregorian year of 365 days, meant that in 1753, the start of the new Tax Year fell on the 4th of April. And so it continued until the year 1800, where the leap years caught up with them, and the beginning of the Tax Year was pushed to 6th April – the date as we know it today.
Why now is the right time to plan
Whilst the Spring Budget didn’t announce many immediate changes to IHT, there was plenty of food for thought across wider estate planning; for example, a rise in Pension Allowances and the scrapping of the Lifetime Allowance Charge, and a lowering of Capital Gains Tax for residential property disposals.
But the biggest change by far was the announcement that the Government intends to move the IHT system for Non-UK Domiciles, to a residency-based system instead of a domicile-based one. In short – individuals of ‘Non-Dom’ status, may find that new assets outside of the UK become, in the next few years, liable for Inheritance Tax here in the UK.
It’s important to note that this was an announcement of what the Government intends to do, and no actual changes have been put in place, as of yet.
But if you feel that you could be affected by the above, it is definitely worth getting your affairs in order. Similarly, if you’re not affected by the latter mentioned above, a new tax year is always a good time to touch base with our legal team for that vital planning piece.
Across our Private Client teams at Prosperity Law, we have a range of expertise across all estate administration and probate requirements. Whether you’re an existing client or looking for effective representation to help you plan for IHT effectively – we’re here to help.
Get in touch with John Paul Dennis at 0151 909 8657 or email jpd@prosperitylaw.com to arrange a confidential discussion about your needs.
