You are here: Home - Retirement - Retirement planning - News -

The coronavirus-related losses that can reduce tax bills

0
Written by: Julia Rosenbloom
16/04/2020
Coronavirus may have had a severe effect on your savings and investments. However, the good news in this otherwise dire situation is that relief is available when it comes to the capital taxes system.

Although the country needs all the tax it can get at the moment, that doesn’t mean the capital tax rules will always ignore fairness. The best example of this is inheritance tax on the estate of someone who has died.

Lower inheritance tax bills that reflect losses in value

Inheritance tax is based on the value at assets at death. However, it can take time for probate to be granted and executors to sell the assets. These delays may be even more pronounced due to government lockdown measures and the economic impacts of the coronavirus pandemic.

Thankfully, the law recognises that it would be unfair to pay inheritance tax on the value of the assets at death if the assets subsequently fall in value. As such, for shares and property sold within a year and four years, respectively, it is possible to make a claim for the inheritance tax to be based on the sale price, if lower, than the value at death.

If property values decrease, you can claim ‘fall in value relief’ on gifts

Assets that are gifted within the seven years before death can incur an additional inheritance tax charge. Usually when this happens, these assets – typically shares or property – will be brought into the calculation of the inheritance tax charge on death at the value they held when they were gifted.

However, a fall in value relief may be claimed when the value of the gifted property has decreased since the date of the gift.

Capital losses can offset your capital gains tax bill

This tax year everybody has an annual capital gains tax (CGT) allowance of £12,000. This means you only pay CGT on gains exceeding this amount.

Where you have assets, most notably stocks and shares, they may now be worth less when you sell them than when you bought them. If so, you will have a relievable capital loss.

This may be particularly helpful if you have made or expect to make capital gains in excess of the £12,000 annual exemption this tax year.

These capital losses could reduce your overall capital gains tax bill by up to £2,800 per £10,000 of relievable loss. Furthermore, capital losses which can’t be offset against gains this year can be carried forward into future tax years.

However, if the same shares that have been sold are re-purchased within 30 days, the capital loss is not relievable. Professional advice should be taken regarding any subsequent re-investment of the sale proceeds.

Plan your gifting

Additionally, given the current Covid-19 restrictions where many weddings are being postponed or cancelled, it’s worth bearing in mind (if you are planning to contribute when these events are reorganised), there is no tax on wedding or civil partnership gifts up to £5,000 to your children and £2,500 to your grandchildren.

Julia Rosenbloom is partner at financial and professional services group, Smith & Williamson

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Nationwide savings bond offers chance to win £10,000

The 18-month Mutual Reward Bond pays an interest rate of 0.5% AER and gives existing members the chance to win...
Nationwide savings bond offers chance to win £10,000

Barclays online banking goes down

Barclays customers have been left unable to make payments or check their accounts due to an online banking out...
Barclays online banking goes down

Another six months working from home: Expenses, benefits and insurance must knows

The government has changed its message on working from home, with those who can, encouraged to do so. Here’s w...
Another six months working from home: Expenses, benefits and insurance must knows

Ryanair jetting towards US flights for £10

Ryanair is on course to achieve its long-held ambition of offering transatlantic flights to the US – and the...

Investing in car parks: a good vehicle for income seekers?

As the search for income continues, many investors are turning to alternatives, with car parks becoming increa...

A quick guide to guarantor loans – in association with Guarantor Loan Comparison

Considering a guarantor loan or becoming a guarantor yourself? Read our essential guide...

Results round-up: Companies to watch this week

Mulberry and more will face the music this week.

Product launches of the week

Select Property Group, Schroders, Leeds Building Society and more have exciting news this week.

Money Tips of the Week

Read previous post:
Furlough rule tweak will see 200,000 more workers eligible for financial support

The government has extended the cut-off date for employees to be eligible for the Coronavirus Job Retention Scheme, which could...

Close