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Inheritance Tax Planning

Limiting your liability through Inheritance Tax planning.

Do you know?

Through responsible and effective tax planning, there are many IHT reliefs available.

Inheritance Tax planning is a key part of protecting your personal balance sheet from financial ‘predators’.

With a standard rate of 40% above the personal allowance of £325,000, without effective planning, Inheritance Tax (“IHT”) has the potential to take a considerable proportion of an individual’s legacy and a family’s assets.

How you structure your assets now through Inheritance Tax planning will determine what happens to your legacy after you are gone. But IHT is complex. The impact on your loved ones could be life-changing – for better or worse. Do nothing and you lose control over who benefits from what and when.

Addressing the issue early and on your terms could help you legitimately reduce IHT liability to your estate and ensure your loved ones benefit from your legacy in the way you intend.

Here to help

As experienced tax consultants, ETC Tax provide Inheritance Tax planning advice to individuals, couples and families to reduce IHT liability while remaining HMRC compliant.

We can draw upon a range of estate protection measures to meet your inheritance goals and minimise tax liability.

One of the key objectives of Inheritance Tax planning is to legitimately limit IHT liability by for example maximising the amount your intended beneficiaries receive. We can achieve this through a combination of family trusts, gifts and wills to suit your circumstances.

We recommend reviewing your Inheritance Tax planning every two years, and following any significant life event such as births, marriages, separation and house purchases, to ensure your plans remain reflective of your wishes.

We also offer specialist expertise in working with families who are internationally mobile in their personal or business dealings.

Do you have a question about inheritance tax planning?

Speak to one our Chartered Tax Advisers

Inheritance Tax Planning FAQs

What is Inheritance Tax?

Inheritance Tax (“IHT”) is the tax paid on assets left when someone dies, after any inheritance tax allowances or exemptions are applied.

More counter-intuitively, IHT may also be applied to certain lifetime transfers including transfers to trusts and also to outright gifts if one fails to survive them by seven years.

Proactive Inheritance Tax planning for your estate is the only way to protect your assets and maximise the amount you are able to pass on to your loved ones.

Do I need to make a will?

In short, yes.

Dying intestate (ie without a valid will) means that your estate will be distributed by reference to the laws of intestacy and not necessarily as you might want it shared out.

It also creates additional cost and administrative burdens on your loved ones, as well as potential complications in relation to claims on your estate.

Irrespective of your personal circumstances – whether you have children or not, are divorced, have overseas assets – the only way to ensure your wishes are carried out following your death is to make a will.

The sooner you take action the more options and the more favourable the options there are open to you. Gifting for example can tax-free, provided the gift was not made in the seven years prior to the death.

We recommend reviewing your estate plan every two years and in response to key life event such as marriage, birth of a child, divorce, house purchase, and changes to IHT rules.

How can I reduce IHT liability?

We are high experienced in drawing on the range of Inheritance Tax planning tools that can be used to manage your tax liability – trusts, gifts, income over expenditure rule and assets that pass on free of IHT. These include, among others:

  • Business Relief – passing on a going concern by reducing Inheritance Tax on it by up to 100%.
  • Agricultural Relief – business relief for working farms.
  • Woodland Relief – omitting the value of the timber in a woodland from the value of an estate.
  • Heritage assets – exemption from IHT for buildings, land and works of art which have historic or scientific interest and are available for the public to view.

Do you have a question about inheritance tax planning?

Speak to one our Chartered Tax Advisers

How can I make use of IHT exemptions?

We can advise on making the best use of the available lifetime IHT exemptions, which include:

  • £3,000 annual exemption
  • normal expenditure gifts out of after tax income
  • gifts in consideration of marriage (up to specified limits)
  • gifts you make of up to £250 per person per annum
  • gifts to charities
  • gifts between spouses, facilitating equalisation of estates (special rules apply if one spouse is non-UK domiciled).

What are the benefits of a family trust for IHT purposes?

Through a family trust, you would be able to protect your estate in a number of ways from the full extent of IHT.
You can for example control what happens with your any life insurance payout and pension funds on your death.

You will also be able to avoid the trap of paying IHT twice when your estate is passed on from your beneficiaries.
And as private documents, trusts will not be made publically accessible, unlike probated wills.
Trusts can also assist in removing the likelihood of your estate being liable to Inheritance Tax twice.

How much IHT will I have to pay?

If you are unmarried or not in a civil partnership, and your total estate is worth
£325,000 or less, then no Inheritance Tax will be due. If the value is more than this threshold, it is likely there will be Inheritance Tax to pay, unless you have taken preventative measures to limit your liability.

For married or civil partners at the time the first spouse partner dies, provided the full estate is left to the surviving spouse, the whole estate is completely free of Inheritance Tax.

When the second partner dies, there will be no Inheritance Tax to pay if the total is £650,000 or less (ie 2 x £325,000 allowance). More than this and it is likely that there will be Inheritance Tax to pay by your heirs when the second spouse dies, unless tax planning measures have been taken.

What happens if I am living abroad?

We are specialists in overseas implications of IHT planning.

When someone living abroad dies, the rules for paying Inheritance Tax usually depend on how long they lived abroad, whether their assets (property, money and possessions) are in the UK or abroad, and if their assets in the UK are ‘excluded assets’.

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