These days, you don’t have to be hugely wealthy to be affected by Inheritance Tax (IHT). More families are calculating the value of their estates and finding they have a greater liability than they’d thought. However, the good news is that expert planning can legitimately reduce the tax payable, allowing you to pass on more of your assets to your family as you’d intended.
IHT is a tax payable on money, savings or any other assets you pass on when you die and potentially on some gifts you make during your lifetime. The current threshold is £325,000 for an individual and £650,000 for a married couple or civil partners. The unused nil-rate band can be passed to the surviving spouse or civil partner on death. The amount of IHT payable is calculated after debts and funeral expenses have been paid, and is charged at 40 per cent.
The new residence nil-rate band
From April, this new rate band, which is rising in stages from April is £100,000 and will reach £175,000 in April 2020, will apply if you leave your main residence to a direct descendant such as a child or grandchild. However, it’s important to be aware that larger estates will find that the relief gets tapered; it reduces for estates worth over £2m and means that an estate worth £2.2m has no residence relief at all.
Getting bespoke advice
We can help you put in place plans to minimise the amount of IHT that would otherwise be payable. This can include making your will, giving away assets in your lifetime, taking out insurance policies, making gifts from your income, making maximum use of your annual tax-free allowances, or giving money to charity.
So, if you’re worried about the likely effects IHT could have on your estate, and would like some in-depth advice, then do get in touch.