On the basis that the particular statutory criteria are satisfied, it is possible to vary the disposition of a deceased’s estate and for the variation to be 'read-back' into the will for IHT and/or capital gains tax purposes. 

This means that the variation is treated as if the disposition is from the deceased’s estate rather than from the beneficiary making the variation, which is often tax-efficient if it enables the original (taxable) recipient of a legacy to re-direct it without giving rise to other tax considerations. 

Variations are most commonly used to increase the tax efficiency of an estate where the IHT reliefs have not been maximised.  

Perhaps the simplest of the reliefs or exemptions is the annual exemption. 

Transfers are exempt in the value of up to a total of £3,000 in each tax year for IHT purposes. 

It is possible to carry forward any unused annual exemption to the following tax year. It is only possible to carry forward the annual exemption by one tax year. 

Possible changes?

During the course of their election campaign and in their manifesto, the Labour party announced significant changes to the taxation of non-doms, which built on previously announced Conservative plans, though these do not necessarily involve wider changes to the fundamental structure of the IHT regime, which has been in place since 1975. 

That said, the technical difficulties inherent in enacting Labour’s proposed non-dom changes are such that a more wide-ranging IHT rewrite is certainly possible. 

In parallel, there have been calls by some for the introduction of a gift tax and/or an annual wealth tax, either of which might affect taxpayers’ views on IHT planning if implemented.

Given the current law in force and the potential for radical changes in the near future by the newly incumbent Labour government, perhaps now more than ever, our advice to our clients remains that they should review their current tax affairs and take advice from a specialist solicitor on their options.

James Austen is a partner and Cameron Crees is an associate at Collyer Bristow