​Inheritance Tax Planning
If you don’t plan ahead, 40% of the value of everything you own above £325,000 could go to the taxman when you die.
What is inheritance tax?
Inheritance tax (also known as IHT) used to be something only wealthy people had to consider. However, in recent years, due to the rise of house prices, this is something which now affects many more of us.
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When someone has died and they leave property, money and/or possessions, this is known as “the Estate”. The Estate has a nil rate band, meaning if it’s below a certain value, no tax will be charged. However, if the Estate is worth over that threshold, inheritance tax may be payable.
The current threshold for the tax year 2024/25 is £325,000. There is also a residence nil rate band (RNRB) which is an additional inheritance tax allowance of £175,000 available on property passed to an individual’s children or grandchildren (including adopted, foster or stepchildren) on death.
What are the main points to remember about inheritance tax?
Inheritance tax can be complex as there are certain situations in which it wouldn’t be payable, for example, when making gifts within allowable limits. It’s important if you’re making a Will and considering inheritance tax, that you seek professional advice.
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Here are a few points to remember when considering inheritance tax:
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If the Estate has been left to a spouse or civil partner, there is no inheritance tax due
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If the Estate has been left to a partner who was not a spouse or civil partner, inheritance tax may be due
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If you are UK domiciled, inheritance tax applies to your worldwide assets.
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Inheritance tax applies to the total value of your estate including any gifts (outside allowable limits) made in the last seven years and life policies not written in trust
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Any mortgages or debt will be deducted together with the nil rate band (when applicable)
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Inheritance tax is charged at 40% of the net value of the Estate
How can you reduce the amount of inheritance tax paid?
There are many ways in which you can lessen the impact of inheritance tax. However, this is an extremely complex area and it’s impossible to list all the different ways.
If you’re thinking about giving away money or assets to your family or friends to reduce the impact of inheritance tax, it may not be that simple. There are time restrictions on making gifts and gifts could also incur other taxes such as income tax or capital gains tax.
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It’s very important that you keep a record of any gifts you made including who you gave it to, when you gave it to them, what you gave and how much it was worth.
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As this area is so complex, we would advise that you seek professional financial advice if you wish to reduce or avoid inheritance tax.
How can we Help?
It’s impossible to detail here the exact methods we could use to lessen the impact of inheritance tax on your family. However, what we can confirm is that we’ll fully assess your situation and advise you of all of the options available to you, of which there will be many.
Whilst we understand this area can be daunting, we can assure you that we’ll thoroughly investigate your financial situation, provide you with every available option and advise you on how to achieve the best possible outcome.
Contact the Holcombe Financial Exports
Should you require advice from one of our experts, please contact us
