Inheritance Tax Planning (IHT Planning)

“Nothing can be said to be certain, except death and taxes” – Benjamin Franklin

The famous quote by Benjamin Franklin illustrates, unfortunately, how inevitable death is to all of us and how certain we are to pay taxes during our life. Having to pay taxes after our departure, I am sure would have us turning in our graves!

With careful planning, we can help mitigate the burden of inheritance tax and our loved ones can receive what we want them to have.

Effective Inheritance Tax planning comes by utilising allowances, tax-efficient investments, life assurance plans and by gifting.

Currently, the nil rate band is £325,000 per person with an additional residential nil rate band of £150,000 (raising to £175,000 in 2020).

Tax-efficient investments can include investments that qualify for business property relief. Generally, Enterprise Investment Schemes and various qualifying AIM-listed shares will be eligible for this relief. It is imperative to make sure the investments qualify as the rules set by HMRC are extremely strict.

Sometimes having a life assurance policy to pay the likely inheritance tax bill is the cheapest and most straightforward way to plan for inheritance tax. Make sure the insurance is written into a trust; otherwise you’ll pay inheritance tax (at 40%) on the insurance payout!

Gifting assets to loved ones before death can be effective at reducing inheritance tax too. It is important to note, however, that there are rules on gifts that HMRC set out, including the 7-year rule on potentially exempt transfers.

In many cases, the sooner we start planning around inheritance tax, the more effective our advice can be. Feel free to call us to arrange an appointment at your earliest convenience.

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