Inheritance Tax Planning

When you die, you may want to leave all of your estate to your loved ones, but HMRC may have other ideas. Your estate is liable to Inheritance Tax, which is basically calculated on everything you own at the time you die less certain exemptions. Sometimes it is also payable on assets you may have given away during your lifetime.

Increased house prices and personal wealth have contributed to pushing more and more people over the Inheritance Tax nil rate band which is currently £325,000. Any nil rate band which was unused by a deceased spouse or civil partner can be transferred to a surviving spouse or civil partner on second death or after 9 October 2007. Nevertheless on death an estate could face a hefty Inheritance Tax bill of 40% on anything over the nil rate band.

Inheritance Tax can be a real financial headache for your beneficiaries when they need it least. For example, the Inheritance Tax bill must usually be paid before the estate can be distributed. This means that your beneficiaries may experience a delay in receiving what you have left them.

It is important to review your will on a regular basis. It should be updated following important changes in your life, such as the birth of a child, divorce, re-marriage, death of a spouse or civil partner.

Ensuring an adequate will is in place is one of the ways to reduce the Inheritance Tax on your death. Other legitimate means are using the annual gift exemptions, life assurance, business property relief, agricultural property relief and various trusts.

If you require assistance in mitigating Inheritance Tax, please contact us.