Tales from the telephones

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Here are some more sample questions submitted by accountants to the ICPA/Qdos telephone helpline

Q: My client’s father has died. Can they claim the additional nil rate band for Inheritance Tax purposes that applies to residential property?

A: Generally a claim is available on any death estate where these criteria are met:

• The estate must include a residential property used by the deceased as a residence at some point during their ownership and must be bequeathed to a direct/lineal descendent. The legislation specifically includes adopted and step children together with grandchildren.

• The additional amount of £100,000 is available for estates on or after 6 April 2017 and will increase by £25,000 per annum until 6 April 2020 when it will continue to increase annually in the Finance Act as determined by the government.

• The additional amount due in respect of residential property can be utilised by a surviving spouse in the same way as the standard nil rate band. There are restrictions where the death estate is in excess of £2,000,000 and then it is withdrawn on a sliding scale of £1 for every £2 over that limit.

Q: My client has asked whether it still possible to continue making pension premium payments after they have accessed their pension savings.

A: The annual allowance, currently £40,000 is generally available to most people, however once a pension pot has been accessed restrictions do apply. Any contribution made in the year of the drawdown or access maintains the same allowance, with the availability of unused allowances from earlier years. In the following tax year the maximum premium that will achieve tax relief is £4,000, this is known as the ‘money purchase annual allowance’. In that year the unused allowances from the previous three years are no longer available.

The restriction applies in a number of specific circumstances, where there has been cash or annuity taken from a flexi-access drawdown, cash withdrawal from a pension pot or a withdrawal in excess of the capped drawdown limit.

It is important to be aware of the potential for this limit to apply as not only is tax relief not available on the excess there will be a charge to income tax on overpaid premiums.