Inheritance Tax Planning

The Chancellor recently announced an increase to the Inheritance tax (IHT) individual nil-rate band. The general band is still firmly fixed at £325,000, but an additional property-only band is being phased-in, to reach £175,000 in a few years time. This latter NRB only relates to the primary residence, and then only if it is willed to the settlor’s children or grandchildren. It therefore can be used to mitigate IHT on a residence of £350,000 for a married couple / civil partners.

Despite this welcome addition to the IHT threshold for tax, it really isn’t enough. Far too many family estates are still finding themselves with potential inheritance tax liabilities. At a whopping 40% of the net estate after use of nil rate bands, IHT is a significant tax on many, rather than just the wealthy. The good news is, however, that IHT is largely a voluntary tax, and with sensible planning it can be reduced significantly. It is essential that you get competent, professional advice, so that your estate can be left to the ones you love, not the tax man.

Certain types of lifetime gifts can now become chargeable to tax immediately during the donor’s lifetime (Chargeable Lifetime Transfers), and some will not (Exempt Transfers and Potentially Exempt Transfers (PETs)). handsome-couple-contemplate-retirementIt is important to understand the differences and inter-relationships between them. IHT planning is often a long-term affair, with a an initial plan designed and then re-evaluated and refined from year to year.

If you are an individual affected by IHT and wish to plan to mitigate your potential liability, you will probably have concerns as to how much control you can maintain over your wealth during your lifetime, the rights you can keep to income and capital during your lifetime, how and when to gift to beneficiaries, and other points of concern. We offer a complete advice service which includes design of a long-term plan, how you can use your exemptions, the manner in which trusts can be utilised, the use of underlying investments and the appropriate investment vehicles, and how to mitigate IHT during your lifetime as well as at death.

We will also work with your solicitor or accountant in completing your arrangements, and offer our ongoing trust investment services to trustees of new and existing settlements. Please call us to discuss. – 0345 013 6525