Inheritance Tax Planning

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Some Basics about Inheritance Tax

  • Inheritance Tax (IHT) is chargeable on the value of an individual’s estate at death including the value of certain gifts made within 7 years before the date of death.
  • There are two rates at which IHT is payable:

          • The first £325,000 (the “nil rate band”) of the estate is chargeable at 0%

          • The value of the Estate above the nil rate band is chargeable at 40%

  • IHT is also payable on certain lifetime gifts and in particular gifts into a discretionary trust.
  • Gifts to spouses, civil partners and charities are exempt
  • In certain circumstances, surviving spouses/civil partners can now make use of the unused element of their deceased spouses/civil partner’s nil rate band

Tax Planning – Before Death

We can help you to assess your present position and to plan to reduce the burden by:

  • Ensuring you have a carefully drawn, IHT effective, Will prepared - this is vital
  • Your Will can also direct your business interests (such as shares in family companies) and farming interests to intended beneficiaries e.g. a son or daughter who has come into the business. An important IHT relief can apply to these interests giving discounts of either 100% (i.e. complete exemption) or 50% depending on circumstances
  • Advising you on what assets can be taken outside your estate on death for IHT purposes and helping you navigate the paperwork.
  • Advising you on how you can reduce the value of your estate for the purpose of IHT by way of gifting
  • Ensuring you hold your assets in the most IHT efficient way and helping you do it. This is particularly relevant so far as your home is concerned. At present, there is no specific IHT exemption for the family home (as there is for Capital Gains Tax). The position of the home in particular needs to be looked at carefully

Tax Planning - Following Death

As the law currently stands beneficiaries and in particular residuary beneficiaries of an estate have two years from the date of death to vary provisions relating to them by a Deed of Variation. This means there are opportunities to avoid IHT – even after death. We can advise you on these and help you through the process.

We can also help you to ensure your affairs are as inheritance tax effective as your circumstances and the system allow.

To discuss how we can help you please email Nick Scott or call us on 01908 692769.