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Inheritance Tax is frequently subject to political manoeuvring so such planning does need regular review.
Depending on your circumstances, the assets that make up your estate and the beneficiaries that benefit from it, you may have opportunities to mitigate Inheritance Tax to a greater degree than is, at first, apparent.
It is important that you understand the opportunities and the methods used to benefit from them and so such opportunities will require specialist advice and careful thought. The financial benefits that can arise from such planning should outweigh the additional complexity and cost involved.
The estate of married couples may benefit from a joint nil-rate band and where one of you has previously been widowed, the estate may even benefit from three or even four, nil-rate bands provided your Wills properly provide for this in a particular way.
Life insurances, Death in Service benefits and pension death benefits all need particular consideration and with careful planning and advice can, when appropriate, be structured to keep any Inheritance Tax to a minimum.
Business owners can benefit from a generous relief from Inheritance Tax, known as Business Property Relief. However, to ensure the relief is maximised and not diluted, this needs to be clearly identified and protected in your Wills.
Farmers can benefit from a similar relief known as Agricultural Property Relief which will often work in conjunction with Business Property Relief.
Inheritance Tax payable can be reduced by gifting to Charities and where 10% of your estate is gifted, a lower rate of 36% can be payable on the remainder. However, the mechanism to ensure the lower rate is available is complex and specialist advice is required for you to understand how it works and the effect on the non-charitable beneficiaries.
£325,000 for everyone, an additional £175,000 if you leave your estate to your children (including step and adopted and grandchildren). These are doubled up to £1,000,000 if you leave everything to your spouse and then children and you are worth less than £2,000,000.
Yes, athough if the estate qualifies it may be comvered by the additional nil rate band (aka residence nil rate band).
No. Inheritance is not considered as income.
Use spouse exemptions if you can to maximise the nil rate bands on the death of the survivor of you. Don’t waste business and/or agricultural property relief. Trusts can help in certain limited circumstances. A suitably qualified solicitor will guide you towards the best solution.
Yes, via the estate not on their benefit like in Ireland or France/Spain.
Very few assets are exempt from inheritance tax. Business Assets such as company shares in a trading business, not an investment company and agricultural property and land. These are subject to strict criteria so if you have these best to seek legal assistance before claiming relief.
The first £325,000 of someone’s estate is tax free and if you own a house that you leave to your childnre there is an additional £175,000. This means that if you have a house worth £200,000 and liquid assets of £300,000 you will not pay any tax. If no child and unmarried then limited to £325,000. If the estate does exceed £500,000 or £325,000 then 40% is paid on the surplus. So if no children and unmarried with a £500,000 estate, £175,000 of the estate is taxed at 40%. Leaving all to spouse is tax free and the widow/widower has potentially up to £1,000,000 tax free.
If you have any questions about inheritance tax, please don’t hesitate to contact our team of experts who are on hand and ready to help you.
