Inheritance Tax Planning
Inheritance Tax is often referred to as the ‘voluntary tax’ as basic planning can reduce Inheritance Tax liability to nil.
Our Approach to Inheritance Tax Planning
How is Inheritance Tax calculated?
As a general rule, Inheritance Tax is paid on an individual’s estate (which includes property, money, listed shares, motor vehicles and other personal possessions) if the estate is worth more than £325,000 at the time of death. Inheritance Tax is usually charged at 40% on anything above this.
In April 2017, a new additional threshold referred to as the ‘Residence Nil Rate Band’ was also introduced. If you own a property, or a share of it, at the date of your death (or if you have downsized, certain provisions also apply), and you leave a share of your estate to ‘direct descendants’ (which includes children and grandchildren) you may also be eligible for an additional £175,000 in Inheritance Tax Relief.
Straightforward steps to reduce your tax liability include rearing your assets or your Will to take advantage of the spousal exemption or charity exemption when making gifts, or when deciding how to dispose of your assets on death. This can include certain trust that allow us to appoint trustees to control our assets after death, and still take advantage of the spousal exemption.
Business owners and farmers can also gain 50% or 100% tax relief on their business or agricultural assets. Certain provisions apply and we would be happy to discuss this further with you in a clear and straightforward manner.
There are also reliefs available when gifting your assets during your lifetime. For example, each individual can gift £3,000 per annum to a child or into a trust. If a gift is made over this amount, you must generally survive for 7 years following the giving of the gift before it is ‘outside’ of your estate for tax purposes. Other exemptions may also apply, which we would be happy to discuss further with you.