Inheritance tax planning

So, what is inheritance tax?

Inheritance tax is a tax on your assets that belong to you when you die.

Inheritance Tax Planning
Assets include the total of everything you own and a share of anything owned jointly. Some of the most common assets are:
  • Property / Land
  • Personal possessions
  • Shares
  • Life insurance death benefits
  • Cash
  • Interest in a business
  • Retirement plans and pensions
  • Future inheritances

Use your nil-rate band

Individuals have a nil-rate band, if the value of your estate is worth less than the nil-rate band, inheritance tax would not be payable. The Chancellor tends to change the nil-rate band at the Budget. For the tax year 2017/2018 the nil-rate band is £325,000 (£650,000 jointly) If your estate is worth more than the nil-rate band your executor may be liable to pay tax on anything above this threshold. The current rate of inheritance tax is 40% based on the 2017/2018 tax year.

There are many factors involved in inheritance tax planning and the process may seem complex and time consuming but don’t worry, we don’t expect you to take it all on yourself – we are here to advise you at every step of the way and to do most of the work for you. Simply give us a call and we can guide you through the process from start to finish.

Call our expert advisers now
01536 483733

It is always good idea to understand what’s happening, so read on to find out more about passing on your wealth.

How to reduce your inheritance tax

Below are some of the option available to reduce your inheritance tax.

Make a Will

The first step to estate planning is to make a Will and keep it up to date. Without a Will your estate will be subject to intestacy rules which could mean that the things you leave behind don’t go to the people you have chosen. Remember that as your circumstances change over time so will the need to update your Will.

Exemptions

There are a number of exemption that could be used to reduce the value of your estate. If used correctly they are the most efficient way to reduce any inheritance tax bill.

Annual exemption allowance– you can gift up to £3000) each year (tax year 17/18). Where total gifts in a year fall short of this allowance, the balance can be carried over to the following year and added to that year’s allowance.

Spouse exemption– most married couples can ensure no inheritance tax is payable by arranging through a Will, that on first death all the deceased spouse’s assets pass to the surviving spouse.

Gifts

If you can afford to gift some of the assets you own it may be possible to reduce the size of your estate, which could reduce your potential inheritance tax bill. Any gifts that fall within the following exemptions, will be immediately outside your estate and the value of them will not be subject to inheritance tax.

Wedding gifts / civil partnership ceremony gifts

Parents up to £5000

Grandparents up to £2500

Anyone else up to £1000

Small gifts

Up to £250 to as many individuals as you like per tax year.

Charity

Gift at least 10% of the value of your estate in your Will and reduce the amount of inheritance tax paid to 36%

Trusts

A trust is a legal arrangement where a person (trustee) holds assets for the good of one or more beneficiaries. Trusts are complicated and must be set up carefully. Please speak to one of our experts advisers, who will be able to advice on what trust, if any, would be best for your needs.

Summary

Hopefully you now a little more about how to minimise your potential inheritance tax liability. If you feel prompted to reduce it, please contact us to discuss your needs and the options available to you.

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01536 483733