Newspaper article The Journal (Newcastle, England)

Tax Change Will Not Hit Middle Incomes

Newspaper article The Journal (Newcastle, England)

Tax Change Will Not Hit Middle Incomes

Article excerpt

Byline: By Nicky Burridge

People on middle incomes with life insurance policies will not be hit by a new tax on trusts, but millions could still need to review their wills.

The Government yesterday said straightforward life insurance policies, such as those taken out to pay off a mortgage if the holder dies, would not be affected by the new rules.

But it will press ahead with changes to reduce the age at which children can gain access to trust funds without incurring a tax charge from 25 to 18, meaning anyone who has set up a trust for a dependent child in the event of their death may need to change their will.

Experts also warned that many people the Government was not targeting with the rules could still be caught out by them. Insurers and tax experts had expressed concern that the new rules could hit millions of people on middle incomes, with one estimate claiming as many as one in 10 adults would be affected by the changes.

But the Government said the new rules, published in the Finance Bill yesterday, would affect only a small number of very wealthy people, and would raise only pounds 15m a year.

The rules apply to Accumulation and Maintenance Trusts and Interest in Possession Trusts, which are generally set up by wealthy people to avoid inheritance tax. Under the move, the trusts will be subject to a 20% tax charge on any funds over the inheritance tax threshold when they are set up, followed by a 6% charge on money above this level every 10 years and a further 6% when the trust pays out. …

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