Tax Planning

Tax Planning

Inheritance tax (IHT) is no longer paid only by the very wealthy. As property prices rise to ever new heights, and the value of savings and other possessions increase, more and more people are being caught by it.

 

As things stand, if your estate is worth more than £325,000 (the “Nil Rate Band”, or NRB) when you die, then the amount in excess of that amount will be subject to IHT at 40%. So on an estate worth £400,000 would have to pay £30,000 tax ((£400,000-£325,000) x 40%) before any of your family receive a penny.

 

Fortunately, there are ways to minimise the impact of IHT, or to eliminate it altogether. All it takes is a little careful tax planning. There are several reliefs and exemptions available to reduce the impact of IHT and all that is necessary is to identify which ones you can make use of in good time. For example –

 

  • you could give some of your wealth away during your lifetime – to your children, perhaps. So long as you survive more than seven years after making the gift, no inheritance tax will be due on it; or,
  • if you are married or in a civil partnership and your spouse/partner dies without using all of his/her NRB, you can add that unused portion to your own NRB. As most couples leave their estates to each other on first death (gifts to a spouse/civil partner are free of IHT), the estate of the survivor can benefit from a NRB of up to £650,000.

 

According to consumer website unbiased.co.uk, “Every year, UK taxpayers give away several billion pounds more [in tax] than they need to. In 2016 the figure is expected to be around £4.6 billion.” They point out that much of this wasted tax comes from Inheritance Tax, “by not planning ahead.”

 

Tax Planning

For help with all your tax planning requirements, please contact us.

 

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