The position of siblings under UK Inheritance Tax (IHT) law received further media coverage last week, prompted by the Utley sisters and also by a tweet from Conservative MP, Sir Edward Leigh. The Conservative MP previously supported a draft bill put forward by Lord Lexden opening up civil partnerships to siblings.
In 2015, Lord Lexden put forward a draft bill to extend civil partnerships to siblings so that when one of them dies, the survivor is not forced to sell the family home to pay IHT. This proposal was rejected by the government and therefore not implemented.
The draft bill to extend the Civil Partnership Act 2004 includes the provision for siblings who are over the age of 30 to enter into a civil partnership, as long as they have lived together continuously for at least 12 years. The draft bill is currently waiting for its second reading in the House of Lords.
The Utley sisters jointly own their property and have campaigned continuously for alternative families like theirs to be recognised in law and therefore benefit from IHT exemptions.
What is current UK Inheritance Tax law?
Civil partners and married couples can claim exemption from IHT on any gifts between them, either in their lifetime or on their death. This is not available for siblings.
If either party’s estate is in excess of the nil rate band allowance (currently at £325,000) it has potential of being subject to IHT at 40%. This is a growing concern for many families like the Utley sisters.
What can be done now to reduce IHT liability?
If the draft bill is unsuccessful in the House of Lords the question remains as to what siblings can do in this situation to reduce any potential IHT liability. In some cases, reviewing your Wills may help mitigate the IHT liability.
Furthermore, Tax planning is just as important for siblings as it is for unmarried couples. A solicitor will be able to discuss various options available to you to reduce the IHT liability.
If you would like to discuss IHT, please contact a member of our Private Client team.