How we can help you save Inheritance Tax.
Last year the Treasury collected over £5 billion of Inheritance Tax. With careful planning, it’s possible to successfully reduce or altogether eliminate the Inheritance Tax bill that your family might otherwise be subject to on your death.
Tax planning steps can also manage Capital Gains Tax so that you’re not faced with a huge bill when you sell or transfer assets.
We can carry out a comprehensive review of your affairs to develop a strategy to enable you to save Inheritance Tax and Capital Gains Tax.
Our Inheritance Tax planning service can:
- calculate the extent of your current exposure to Inheritance Tax and Capital Gains Tax
- advise on lifetime gifts
- recommend the use of Trusts
- maximise tax allowances and reliefs including Agricultural Property Relief (APR) and Business Property Relief (BPR)
- liaise with your other advisers to ensure a joined-up strategy is implemented
FAQs about Inheritance Tax.
Inheritance Tax is a tax on the value of the assets that you own when you die. People refer to those assets as ‘your estate’.
If you have a life interest or a right to income from a trust (or a right to occupy trust property) IHT can also be charged on the trust assets. IHT can also apply to gifts or transfers of value made by you during your lifetime.
IHT is paid from your estate before any assets are distributed to your beneficiaries. Assets may need to be sold to pay the IHT.
There are various reliefs and exemptions from IHT which we can help you to maximise so that your beneficiaries receive as much of your estate as possible.
If the value of your estate on death, after deducting exemptions and reliefs, does not exceed the available IHT allowance then no IHT is payable. This IHT allowance, known as the Standard Nil-Rate band threshold is currently £325,000. The value of your estate includes any substantial gifts made by you within 7 years of death and assets in which you’ve reserved a benefit (even if given away more than 7 years before your death).
Reserving a benefit is when you give away an asset but continue to get a benefit from it. For example, you gift someone your house but continue living in it yourself.
An extra IHT allowance of £150,000 (rising to £175,000 in April 2020) is also available when a residence is passed to a ‘direct descendant’ or to certain types of qualifying trusts. This is known as the Residence Nil-Rate Band. The qualifying rules are complex and not every person with children will qualify for the relief.
IHT is paid by your estate (the assets you own at your death) before your beneficiaries receive anything.
Generally speaking, IHT must be paid before Probate can be granted. Although the executors will require a Grant of Probate to close your accounts and to sell assets, most major banks and other financial institutions can arrange a direct payment of the tax to HMRC before Probate is granted.
IHT on some assets cab be paid by instalments over a ten year period but interest is charged on the outstanding amount.
You may wish to consider taking out a life insurance policy which is written into a trust as this can provide funds to pay your IHT liability immediately.
If your estate includes a business or business assets, it may qualify for Business Property Relief (BRP). Depending on the type of assets they may pass free of IHT or qualify for relief at 50%.
If you are a farm or landowner, you can also pass on assets that benefit from Agricultural Property Relief (ARP). Other assets in the farm business may also benefit from BPR.
A complex set of rules have to be considered carefully when applying tax reliefs to businesses and agricultural property. It is vital that you take proper legal advice to maximise the available reliefs and to prevent them from being wasted. This will ensure the continuity of your business.