Sticking a couple of tickling sticks up at the Inland Revenue!

“I’m Kenneth Arthur Dodd. Singer, photographic model and failed accountant.” So began many of Sir Ken Dodd’s famously lengthy variety shows. Sadly this is the first year in a long time when Ken Dodd did not star at the Bournemouth Pavilion on Easter Saturday.

His show would start around 7pm and he would finally leave the stage after midnight, even at the age of 90. A number of his jokes would be about income tax and VAT. “Self-assessment – I invented it!”

When the sad news of Sir Ken’s death was announced, it was also stated that he had married Anne Jones, who appeared as a support act in his show as Sibby Jones, only two days before he died. We understand that they had been a couple for 40 years. Sir Ken had lived in the same house in which he was born 90 years ago in Knotty Ash, Liverpool, which had once belonged to his grandmother.

It will be interesting to find out what is in his will if and when probate is granted, not least since it was rumoured during his trial for tax evasion in 1989, from which he was acquitted, that he kept £300,000 in cash hidden in his house.

Had he died without being married, only the first £325,000 of his estate would have been free from inheritance tax (unless left to charity). Anything over and above that figure would be taxed at 40%. As a married person, even if Sir Ken left millions of pounds to Lady Anne, she will not have to pay inheritance tax. This is the “spouse exemption”. No matter how much someone leaves to his or her spouse, no inheritance tax is charged.

When the spouse subsequently dies, if she or he had inherited everything (or if the only other beneficiaries were charities), then the nil rate band (currently £325,000) is doubled making the first £650,000 of the couple’s joint estate free from tax. This is known as the “transferrable nil rate band” and has operated since 2007 avoiding the need to set up complicated trusts to ensure that both people’s nil rate bands are available to off-set against inheritance tax.

Unmarried couples do not have the “transferable nil rate band” and so upon the death of the survivor he or she only has his or her own nil rate band. If newspaper reports are correct and Sir Ken left a fortune of over £7m to his widow then he will have saved nearly £3m in inheritance tax by marrying Anne shortly before his death. Anne can now potentially give away large sums of money and avoid such sums being liable to inheritance tax when she dies provided that she lives for seven years after making such gifts.

If you have any queries about your potential inheritance tax position then please do seek advice from Dixon Stewart.