Key frontline workers now exempt from Inheritance Tax
In news that will be welcomed by many, the families of front-line workers are to be exempt from Inheritance Tax (IHT) should they pass away as a result of COVID-19, in what the government calls the ‘blue light exemption’.
As an adviser, by keeping up to date with regulation changes, you will be in the best position to provide key recommendations to your clients are who are affected by the pandemic.
Having this knowledge can help you to further develop trust with your clients by offering a service that is uniquely tailored to their situation.
What is the ‘blue light exemption’?
Originally drafted in by parliament to attract more retired doctors and emergency service workers back to the front-line, the list of personnel eligible for the ‘blue light exemption’ has recently been extended to recognise the services of more key workers during the pandemic.
This extension will now provide employees of publicly funded care homes, home care workers, and charity workers affected by the virus with security in these difficult times.
The tax relief can apply to a person’s estate, including their:
- Property or business
- Possessions and cash
- Gifts and trusts to children and grandchildren
- Pay-outs from life insurance policies
- Jointly held assets, such as joint property
A brief history of IHT reliefs and exemptions
In 1796 a tax on British people’s estates was introduced by the government to help fund the Napoleonic Wars, which lasted until 1815.
Despite the value IHT brings to UK plc, the Napoleonic Wars saw IHT relief or exemptions introduced by parliament to recognise the gallantry of soldiers killed in the line of duty.
These exemptions were extended again during the Second World War. As well as those who were killed in action, those who passed away from disease or injury were also automatically granted full IHT relief.
More recently, in 2015, this inheritance tax exemption was extended to include emergency services personnel such as doctors and nurses, paramedics, ambulance staff. Now, in 2020, all key workers, or ‘blue light’ workers, are the latest notable additions.
Next steps advisers should take
Although it is not yet clear how far the ‘blue light exemption’ will go, it is hopeful the government will apply these exemptions to other paid or voluntary workers who have provided essential medical support to seriously ill people and their families who have fallen victim to COVID-19.
However, it is clear over 200 years later, IHT continues to impact people from all walks of life.
The government collected £5.4 billion in IHT receipts during 2018-19, an increase of 3% (£166 million) on the previous tax year. These receipts are only expected to climb further still as the average inheritance is set to reach £91,000 by 2027.
As a result, it is now more important than ever that your clients have the latest information that could protect their legacy and offer security to their families and beneficiaries.
COVID-19 Advice Services for advisers
Inheritance Tax is an everchanging piece of legislation. The current crisis has further highlighted that clients need to think long-term in order to ensure their beneficiaries are supported for years to come.
The pandemic has highlighted a growing need for advice and support to those whose succession planning or businesses have been restricted by social distancing and lockdown measures.
As an adviser, you have the opportunity to bridge the knowledge gap between the law and your clients. Having appropriate and up-to-date legal advice can help further cement relationships and get clients to develop longer-term financial plans.
In order to help you do this, we have partnered with Kingsley Napley LLP – an internationally recognised law firm – to provide you with specialist COVID-19 Advice Services.
Our trusted partner provides essential support services to advisers on how the ongoing crisis affects your business as well as offering insights into UK healthcare, employment and immigration laws that are crucial for financial advisers to understand in order to deliver a more well-rounded service.
If you would like to find out more about these services, click here to visit our dedicated COVID-19 Advice Services page.
Our experienced team is here to help
This situation with COVID-19 is unique and potentially daunting for everyone involved. However, it has highlighted the essential nature of estate and succession planning in order for people to protect those they hold dear by leaving a lasting legacy.
If you have any further questions or want to find out more about how Stellar Asset Management could help develop your service, contact a member of our team on 020 3907 6984 or email email@example.com.