Clampdown on multiple nil-rate bands for trusts
In response to the Chancellor’s Autumn Statement, tax specialists have warned that trusts will fall even further out of favour after the government announced plans to abolish the use of multiple nil-rate bands.
At present, a saver can create multiple trusts, with a £325,000 nil rate band applied to each. However, under the planned changes, they would be entitled to just one nil-rate band split between the multiple trusts.
Gary Heynes, head of private client at Baker Tilly, said the proposed move would lead to a further decline in trust use, after inheritance tax was applied to them in the 2006 Budget.
‘Since 2006, there’s been a steady decline in the use of trusts and they will continue to be less used,’ he said, adding that the move would penalise some ‘ordinary and innocent situations’ in the name of combating avoidance.
Richard Mannion, national tax director at Smith & Williamson, added the planned move would accelerate savers’ move away from trusts as succession planning vehicles.
Skandia meanwhile claimed that while the change would lead to greater tax liabilities, ‘the benefits of trusts for estate planning remains’.