Organising estates may remove IHT tax woes

An attempt to amend the Finance Bill failed this week, meaning that elderly siblings who have lived together for many years will not get inheritance tax advantages.

Labour MP Frank Field had proposed an amendment to the bill which would affect wills and deaths, particularly where siblings are involved.

Two siblings

He was inspired by the case of two sisters who lost a legal battle to win the same inheritance tax rights as married and gay couples. Joyce and Sybil Burden, aged 90 and 82 respectively, lost their case in the European Court of Human Rights earlier this year.

It ruled that they did not face unfair discrimination, despite the fact that the pair had lived with each other for their entire lives. This also landed the couple with a legal bill of £10,000, as well as the tax time bomb facing the sibling who lives the longest. She could be forced to sell the family home to meet the £61,000 tax sum, the Daily Mail reported at the time of the ruling.


Mr Field proposed that a brother or sister that had lived together for ten years or longer should enjoy the same protection from inheritance tax as a married couple or civil partners.

Under current laws, married couples do not pay tax on each other's estate. These rules also apply to same sex couples registered by a civil partnership. When one half of the couple passes away they can pass money to their partner tax-free and the only charge that applies is a tax of 40 per cent on anything over £312,000. This means there are considerable disadvantages for siblings who live together.

Not backed

But his bid make amendments to the bill failed after the Tories decided to withdraw their support for the bill. Labour backbenchers had supported the bill but there backing was not enough to see it passed.

Mr Field was disappointed with the outcome and said the current system was unfair to siblings. Speaking to the Liverpool Daily Post, he said: "The current duties result in many bereaved siblings having to sell up their homes and start all over again."

Poor planning

If the rules of inheritance tax are set up to your disadvantage it is worth taking action. According to the Guardian, HM Revenue and Customs (HMRC) made £3.8 billion from inheritance tax in 2007, but £1.9 billion of this was paid because of poor planning, research from, has suggested.

Money can be saved by writing a will to sort out simple finances. By using certain rules, siblings are able to ensure their finances remain secure - using trust funds, making the most of annual exemptions and dealing with an estate as soon as possible are some recommended course of action.

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Published on: July 7, 2008

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