There are many ways you can reduce your inheritance tax (IHT) liability if you plan correctly. It is really never too early to start this planning, especially if you are concerned about the IHT liability upon your death.
By way of background, every individual has a tax free threshold (referred to as the ‘nil rate band’) which is currently £325,000. Broadly speaking, IHT will be payable at 40% of the value of your assets that exceed this threshold unless specific assets qualify for the available reliefs. For example, from April 2017, there is an additional tax free allowance if you pass on a home to your descendants provided that all the relevant eligibility conditions are met
Transfers between spouses during lifetime and on death are exempt for IHT purposes (as are transfers to charities). On the second death, the combined estates are then subject to IHT.
However, spouses can also benefit from the transferable nil rate band, meaning that, in time, a surviving spouse could benefit from a tax free allowance of up to £1,000,000 on the second death.
Gifts are one of the most common ways to plan for IHT. Some options are as follows:-
Get ready for our final blog which will appear on 18 January.
In the meantime, if this blog has raised any questions, please get in touch using the Enquiry Form or call us now on the number below.