Estate and Tax Planning
Inheritance tax can have a significant impact on how much money you can leave your family.
Inheritance tax is a tax on the estate (property, money, and possessions) of someone who has died. If your estate is valued at £325,000 or more you are likely to have to pay inheritance tax unless:
- You leave everything to your spouse/civil partner in your will.
Gifts made between husband and wife or between civil partners are exempt from inheritance tax.
Since October 2007, spouses and civil partners are able to transfer any unused portion of their nil-rate band to each other on death. This means that if you have been widowed you could leave an estate of up to £650,000 without any inheritance tax being payable.
- You donate the estate in its entirety to a charity or amateur community sports club.
Normally, everything above the threshold of £325,000 will be taxed at 40%. However, our expert team can advise as to how the amount you need to pay can be reduced through tax planning.
Make use of your allowances and exemptions during your lifetime.
- The new Residence Nil Rate Tax Band (introduced April 6th, 2017) means that you can increase your tax allowance by an initial £100,000 by passing your home onto your children (including foster children, step-children and adopted children) or grandchildren in your Will. This is set to increase by £25,000 annually over the next few years. By April 2020, the RNRB will have increased to £175,000 per person and after April 2020 the increase each year after that will be in line with inflation.
- Making gifts out of income.Gifts in consideration of marriage; £5,000 from a parent to a child, £2,500 from a grandparent to a grandchild and £1,000 to anyone else.
- You can give away up to £250 in small gifts – as long as you haven’t made another gift to the same person.
- You can give away up to £3,000 a year free of inheritance tax.
- If you make a gift and die within 7 years from making it then Taper relief may be available.
- If you make a gift and survive for 7 years this gift will be exempt from inheritance tax.
- Business Property relief – either 50% or 100% depending on the assets and structure of the business
- Agricultural Property relief – either 50% or 100% depending on the structure of the farm and land
- These reliefs both have complex rules so it is important you seek legal advice to make sure you qualify.
You may be able to reduce the amount of inheritance tax by carrying out some simple planning. We can also advise if your estate is likely to incur an inheritance tax liability after your death.
Call us on 01244 312306 to make an appointment with us or find out further information.