Inheritance Tax - Andrew Wright Practice

• Exemptions from Inheritance Tax

 

Inheritance Tax Planning

The rapid growth in property values over recent years means more people are falling into the Inheritance Tax trap. The average house price in Harrogate is £255,679, and England & Wales is £211,452 (Land Registry figures September 2006). But your house is not the only asset you own - what about your car, savings, jewellery and other items of value, and even property abroad.

On death, no Inheritance Tax is payable on the first £300,000 of an individual's estate (this is usually referred to as the Nil Rate Band). Inheritance Tax is charged at 40% on the balance over this threshold.

With good advice there could be ways of reducing your Inheritance Tax liability. Your starting point should always be to write a Will and keep it up to date, but this is no substitute for proper lifetime tax planning.

Before any Inheritance Tax Planning is undertaken, there are certain considerations that should be included into your strategy:

Be realistic

This cannot be over-emphasised. Do not think of tax savings as your prime motivation. Inheritance Tax Planning is about passing the proceeds of an estate to chosen heirs or to beneficiaries rather than to the Inland Revenue. However, this should never be at the expense of maintaining an acceptable lifestyle.

Be flexible

Plans may need to change in future due to:

• Legislation changes
• Changes to or the addition of beneficiaries
• Changes in your circumstances

At all costs, avoid taking irrevocable actions now unless absolutely necessary.

Keep things simple

In view of the complexities involved with Inheritance Tax Planning, if a simple solution can be found, it will usually be the best solution.

There are practical courses of action to mitigate Inheritance Tax:

• Ensure your Will is written and planned correctly to save the maximum amount of tax.
• Make use of all current exemptions and reliefs.
• Transfer assets through the prudent use of lifetime gifts.
• Create a tax-efficient fund to enable the beneficiaries of an estate to meet the tax liability without disturbing the family wealth.
• Consider the use of designed schemes such as:
  • Discounted Gift Schemes
  • Loan Schemes
  • Alternative Investment Market Schemes

Within these broad headings, a variety of methods can be used. However, no one method can, or should, be considered a 'complete solution' as each person will have differing circumstances and requirements and the taxation environment can change from time to time.

 

For information about Inheritance Tax Planning within a will CLICK HERE