The value of your estate can be more than you think. Above a certain amount, you can be taxed at quite a significant rate, however with careful planning, you can maximise the value of your estate and mitigate some of the impact of tax burdens, particularly that of Inheritance Tax. The main exemptions to inheritance taxation are the individual nil rate band at currently £325,000, together with the individual residence nil rate band of £175,000, giving a total of £500,000 allowance for an individual (subject to certain conditions). These allowances have been frozen for a number of years, and unfortunately the possibility of facing inheritance tax is more likely than ever before now. Here, we list some of the ways of helping to reduce any potential inheritance tax burden on death:
Gifts can be made annually up to £3,000 with no tax implications, and are not included in your death estate. If the allowance has not been utilised in the previous tax year, this can be brought forward one year, meaning a maximum of £6,000 is potentially available to gift.
These can be made annually to any number of individuals. No brought forward of unused allowance is available.
Any gift over this limit is referred to as a Potentially Exempt Transfer. If you survive for a period of 7 years after making the gift, the value of the gift is removed from your estate, with no inheritance tax implications.
Often overlooked, this is an extremely valuable option available to donors in the fortunate position whereby income receivable is greater than required for day to day living. Gifts must be regular and form a pattern, e.g. paying school fees for grandchildren or financial assistance to children. These gifts, if they qualify, will be excluded from inheritance tax.
A trust is a separate legal entity, with its own nil rate band of £325,000. Moving assets and/or cash to a trust can achieve valuable inheritance tax savings. It should be noted however that trusts carry a large amount of administrative work, so it is advisable to discuss all the options before undertaking the creation of a trust.
If you are considering how to reduce the inheritance tax burden on your estate, we can review your personal position and provide the best options available to you to not only help save inheritance tax, but other common taxes that arises on a review, for example capital gains tax, stamp duty land tax, etc.
It is also extremely important to regularly review your Will as changing circumstances in life can mean you may with to make valuable amendments. Making a will is one of the most important administration takes in life, and we would be delighted to help should you wish to arrange this, or to update an existing Will.
Please call Lisa Thompson on 01732 378979 to discuss further.
This article is for general information only and does not constitute legal or professional advice. Please note the law may have changed since this article was published.
We do not accept responsibility or liability for any actions taken based on the information in this article.
