How To Make The Most Of Unused Inheritance Tax Allowance

The UK tax office has recently updated its rules for transferring any unused portion of basic and additional IHT thresholds when the first person in a marriage or civil partnership dies.

Find out more about the basic and additional IHT thresholds and see examples of how unused portions can be transferred to a surviving spouse or partner.


The Basic Tax-Free Threshold

The basic tax-free threshold available when a spouse or civil partner dies can be increased to as much as £650,000 ($843,933, €715,226) if none of the £325,000 threshold was used when the first of the couple died.

The basic threshold that is available to their estate is increased by the percentage of the threshold that was not used when the first partner died.



Paul dies leaving legacies totaling £600,000. He leaves £130,000 to his children and the rest to his wife.

The available threshold at the time was £325,000.

The legacies to the children would use up 40% (£130,000 ÷ £325,000 x 100) of the threshold, leaving 60% unused.

When his wife dies, the threshold is still £325,000, so their available threshold would be increased by the unused percentage (60%) to £520,000.

If his wife’s estate isn’t worth more than £520,000 there’ll be no IHT to pay when she dies. If it’s worth more, IHT should be paid on anything above £520,000.


Transferring any unused basic threshold

The estate’s executors must claim to transfer the unused basic threshold when the husband, wife or civil partner dies.


Unused additional threshold

If someone owned their own home or a share of one, their estate may be entitled to an additional threshold.

The extra amount for 2017/18 is up to £100,000. The maximum available amount will go up yearly.

Any additional threshold that is not used when someone dies can be transferred to their husband, wife or civil partner’s estate when they die.

This can also be done if the first of the couple died before 6 April 2017, even though the additional threshold was not available at that time.

The additional threshold and any transferred additional threshold is available if the surviving husband, wife or civil partner:

Leaves a home to their direct descendants; or,

Includes the home in their estate.


Qualifying criteria

The home that the surviving husband, wife or civil partner leaves to their direct descendants does not have to be the same home that they lived in with their partner to either qualify for the additional threshold or to transfer it.

The surviving husband, wife or civil partner does not have to have previously owned the home with their late partner, or inherited it from them.

It can be any home as long as the surviving spouse or civil partner lived in it at some stage before they died and the home is included in their estate.

If the surviving husband, wife or civil partner sold or gave away their home on or after 8 July 2015 and they leave other assets to their direct descendants when they die, the additional threshold may still be available under the downsizing rules.

Couples who are not married or in a civil partnership, or who have divorced, will still be able to benefit from the additional threshold individually if they leave a home to their direct descendants. But they won’t be able to transfer any unused additional threshold to each other.


Pre-April 2017

Where the first of the couple died before 6 April 2017 their estate wouldn’t have used any of the additional threshold as it wasn’t available.

So, 100% of the additional threshold will be available for transfer unless their estate was worth more than £2m and the additional threshold is tapered away.

It’s the unused percentage of the additional threshold that’s transferred, not the unused amount.

This makes sure that if the maximum amount of additional threshold increases over time, the survivor’s estate will benefit from the increase.


Calculating additional threshold

You calculate the actual amount that is transferred to the surviving spouse or civil partner’s estate in two steps:

Step 1. Work out the percentage of additional threshold that wasn’t used when the first of the couple died.

You do this by dividing the unused amount of additional threshold by the total additional threshold that was available when the first of the couple died and multiplying the result by 100.

If the person died before 6 April 2017 the unused additional threshold and total available additional threshold are both deemed to be £100,000 so the unused percentage is 100%.

Step 2. Multiply the percentage of additional threshold that was unused when the first of the couple died by the maximum additional threshold available at the time of the survivor’s death.

This gives you the sum available to transfer.


Case Study

Philip died in 2015 and left his entire estate to his wife. This was before the additional threshold was available.

So, when he died, the additional threshold could not have been used. That means 100% is available to transfer to his wife’s estate.

His wife dies on 30 July 2019 and leaves all her estate, including a home worth £400,000, to her daughter.

Having died in the tax year 2019/20, the maximum available additional threshold is £150,000.

Her executor makes a claim to transfer the unused additional threshold from Philip’s estate.

So, the total available additional threshold for Philip’s wife’s estate will be £300,000 (£150,000 + (transfer of 100% x £150,000)).


Transferring any unused additional threshold

The estate’s personal representative will need to give details of the amount due and supporting information on the IHT return.

They will make a claim to transfer any unused additional threshold from the estate of a late husband, wife or civil partner.

They will also need to make a claim for any additional threshold as a result of downsizing selling or giving away of the home before the person died.

As the additional threshold and basic IHT threshold are not linked, the percentages transferred can be different.

This means that even if all of the basic IHT threshold was used when the first of the couple died, you can still transfer the unused additional threshold.

The percentage of transferred additional threshold will be limited to 100%.

This means that if an individual has had more than one spouse or civil partner and they make a claim to transfer the unused additional threshold from each one, the total transferred additional threshold can’t be more than 100% of the maximum available amount.


We know this tends to get complicated and it’s something that people do forget about or don’t tend to talk about, so we can help. I’m happy to arrange an introduction via call, Skype or face 2 face, just let me know and of course, as always, everything is private and confidential that is discussed.

All the best



Farringdon Group

+60 3 2026 0286




Source: International Adviser

Robo-Advisors gaining traction in ASEAN – The Asean Post


Farringdon Group CEO Stuart Yeomans speaks to The Asean Post during an interview at his office in downtown Kuala Lumpur, Malaysia on Aug. 3, 2017. (Joshua Paul for The Asean Post)


The growing Muslim population worldwide, coupled with the increasing demand from the same for Shariah-compliant products, is creating a huge opportunity for the development of financial technology (FinTech) in terms of Shariah-compliant investment-related products.

It offers a massive potential for digital investment advisory services providers to tap into the growing needs for robo-advisors in Asia particular the ASEAN markets, which has more than 600 million population.

Although the usage of Shariah-compliant robo-advisors are still in the nascent stage in Asia, but there are already signs for embracing these new FinTech in the market as investors are looking for an alternative platform with lower cost and high-quality services.

Farringdon Group’s CEO Stuart Yeomans said the robo-advisory services can be used at a very low cost and caters for both the common man on the street to the ultra-wealthy.

Malaysia has higher chances of becoming a global hub for Shariah-compliant robo-advisors in the Southeast Asian region, as there is a huge market for Shariah-compliant investment products.

“Somehow, we have a massive legacy here in Kuala Lumpur, such as building software products and coding system. And it is very economical and cheaper,” Yeomans told The ASEAN Post in an interview.

Farringdon Group, which launched Shariah-compliant robo-advisory services in Malaysia on July 10, is also looking at broadening its horizon in the Southeast Asian markets by tapping into the Indonesia market, which has a large quantity of Muslim population as well.

The platform known as Algebra is based on Shariah investment guidelines and uses a Shariah investment strategy that has been approved by Amanie Advisors’ Founder and Group Chairman, Dr Mohd Daud Bakar.

Algebra, which uses Virtual Mutual Fund Technology (VMFT), is charging only 0.85% fee annually with a minimum initial investment of US$4,000.  

“Yes, Asia has a lot of potential but we have to see the take up rate here first, before penetrating into newer markets,” he said, adding that the company is also planning to make presence in Middle Eastern and Indian markets.

Assets under management (AUM) managed by robo-advisors in the Asian markets is expected to grow exponentially, with the shift from the traditional advisors.

Consulting firm A.T. Kearney forecasted that AUM by robo-advisors will grow by 68% annually to a whopping US$2.2 trillion by 2020. The robo-advisory services adoption rate is forecasted to grow by 5.6% of the total investment assets using robo-advisory services within the same time period.

Robo-advisory is the next step evolution for asset management and financial advice as it is fully digitalised and priced low. The strategic implication of the emergence of robo-advisory services could be profound with increasing consumer expectation for transparency, low-cost products and digitally agile solution.

Having human financial advisor would restrict the quality of the investment management with room for human error and insufficient analysis as there are possibilities to compromise on investors’ interest.


Courtesy of Premalatha Jayaraman – The ASEAN Post

Week 32 In Review – Stocks Retreat Amid Geopolitical Tensions


· War of words between North Korea and US intensifies amid UN sanctions

· US inflation rises less than expected

· Venezuelan Constituent Assembly declares itself superior

· UK floats trial balloon on divorce settlement

· FTSE 100 hits a 3 month low


Growing concerns about the risk of conflict on the Korean Peninsula and some disappointing corporate earnings reports sent the major U.S. equity benchmarks lower for the week. The Dow Jones Industrial Average’s streak of nine record-setting high closes ended Tuesday as rhetoric between the U.S. and North Korea escalated, with President Donald Trump saying that North Korean aggression would be met by “fire and fury.” More substantial losses followed on Thursday—for the day, the tech-heavy Nasdaq Composite lost 2.13%, the broader S&P 500 Index declined 1.45%, and the blue chip Dow was off nearly 1%.


Thursday’s sell-off ended a period of record-low volatility during which the S&P 500 Index had gone 15 days without moving more than 0.30%. Equities recovered somewhat on Friday.




North Korea threatens Guam after Trump’s warning

US president Donald Trump warned North Korea in no uncertain terms this week that its continued threats, if carried out, would be met with overwhelming force. North Korea, undeterred, announced it was planning to target the waters surrounding the US territory of Guam with four missiles and that a plan would be ready within a matter of days. Trump responded by noting US military plans are now “locked and loaded” should North Korea act unwisely. Earlier this week intelligence assessments became public revealing that North Korea has likely acquired the technological capability to miniaturize a nuclear warhead, making it deliverable by missile. North Korea recently tested a missile believed to have the range to reach parts of the United States. Tensions have risen further in the wake of additional United Nations sanctions against North Korea that were unanimously agreed upon by the UN Security Council. The sanctions aim to cut North Korean exports by one-third and ban exports of coal, iron ore and seafood.


Muted US inflation data raise questions for Fed

The Consumer Price Index rose just 0.1% in July after not rising at all in June, the fifth straight month of below-forecast inflation figures. While the US Federal Reserve has said it sees the recent decline in inflationary pressures as transitory, markets are not so sure. Futures markets forecast just a 40% chance of another rate hike before the end of this year.


Venezuelan superbody declares itself supreme

The newly created Constituent Assembly this week declared itself supreme over all other branches of Venezuela’s government. A growing list of governments, including the US, the European Union and the supranational Organization of American States, have declared the assembly illegitimate. The US went so far as to sanction eight individuals with roles in the body’s formation, but has yet to sanction Venezuela’s oil industry, which is the third-largest global exporter of crude to the US.


European shares suffer Trump backlash

European stocks fell following rising tensions between U.S. President Donald Trump and North Korea’s leader Kim Jong-un. The pan-European benchmark Stoxx 600 logged three consecutive days of losses, ending the week nearly 3% lower—one of the worst weekly losses this year. The FTSE 100 hit a three-month-low on Friday, and on Thursday Germany’s DAX 30 briefly traded below the 12,000 level for the first time since April.


UK opens the bidding at €40 billion?

British negotiators appear to have floated a trial balloon in the press on the size of the divorce payment Theresa May’s government would be willing to pay to leave the European Union. The Sunday Telegraph reported that the United Kingdom would be willing to pay €40 billion, but only on condition that the payment come as part of a deal that included the future trade relationship with the EU. UK officials shot down the report as speculative, but it would appear to be a reasonable starting point for negotiations. EU officials have floated exit-charge figures of between €50 billion and €100 billion.



As of 9 August, 447 of S&P 500 Index companies have reported earnings for the second quarter. Earnings for the index as a whole are expected to rise 11.9% compared with the same quarter a year ago, and 9.2% when stripping out energy companies. Revenues are seen up 5.1% versus Q2 2016, 4.1% ex-energy.










All the best and have a great week ahead



Farringdon Group

+60 3 2026 0286

Malaysia’s Strange, Sinister Crunch









It’s unnatural for loan writing to run ahead of deposit taking for so long.

Something weird is going on at Malaysia’s banks. And no, it has nothing to do with the 1MDB money-laundering scandal.

The problem is about deposits, or more precisely, a lack of them. As CIMB Group Holdings Bhd. analyst Winson Ng notes, the banking industry’s loans-to-deposit ratio has gone from 76 percent in February 2012 to 90 percent in June. For Malayan Banking Bhd., or Maybank, the ratio is approaching 101 percent, a level last briefly seen in 2006, according to data compiled by Bloomberg.













Maybank may be the canary in the coalmine.

The largest Malaysian lender controls 26 percent of the $411 billion the country’s publicly traded financial institutions have in deposits. For almost three decades, Maybank’s loans and deposits have both grown at a compounded annual rate of 13 percent. In the past five years, however, deposit growth has slowed to 9 percent, while loans are still expanding at 11 percent. That gap of 2 percentage points is pushing up funding costs.

Large Malaysian banks — Maybank, Public Bank Bhd., CIMB and Hong Leong Bank Bhd. — are now earning a net interest spread of less than 2 percent, which puts them in the ranks of emerging Asia’s least profitable lenders.


















With deposits getting squeezed, listed Malaysian banks and their subsidiaries have raised $6.4 billion from fixed-income markets this year, the most since 2014. Less than half of it is in ringgit, though.

The growing reliance on foreign-currency debt is disadvantageous. Borrowing three-month money in the local interbank market, and using those funds to buy dollars for the same period, costs Malaysia’s lenders 1.9 percent, an 60-basis-point spread over Libor. In Asia, this premium for short-term dollar funding is stiffer only for Indonesian banks. Unlike their Malaysian peers, however, the Indonesians have plenty of margin headroom.













It’s unnatural for loan writing to run ahead of deposit taking for so long. A similar surge in Indian banks’ loans-to-deposit ratios between 2008 and 2014 coincided, initially, with abysmal interest spreads. To boost the latter, lenders threw money at any large company that showed up with a semi-cooked proposal. The cycle ended, predictably, with a blowout in nonperforming assets.

Big Malaysian firms aren’t as reliant on banks for funding, which has helped contain system-wide bad loans at 1.65 percent. However, if banks keep paying more for deposits, they’ll have to accept riskier borrowers. The longer it goes on, the more sinister the deposit crunch may become.



Courtesy of Bloomberg Gadfly