Inheritance Tax (IHT) planning

The nil-rate band i.e. the amount an individual can potentially pass on tax free on death is currently £325,000 and making full use of this could save your estate from a whopping tax hit of 40%. Things such as cash, investments, property, vehicles and life insurance proceeds could be subject to 40% tax on death.

Although the nil rate band is currently £325,000, there are a number of ways in which this allowance can be extended. For example if you were to include a residency in your estate which met certain criteria then you can qualify for the ‘residency nil rate band’ which would add £125,000 to your threshold taking the total amount that can be passed down tax free to £450,000.

You could also do things such as making lifetime gifts under the potentially exempt transfers (PET) rules or leave money to a charity. Did you know that married couples or couples in civil partnerships where a partner has passed away can have the remainder of their allowance passed to their surviving partner? This could potentially double the nil-rate band for the survivor to £900,000!

IHT planning is a complex process but there are a number of ways of reducing the potential liability and ensuring your hard earned capital and investments is passed on to your loved ones.  If you would like to explore ways on how you can reduce your IHT liability or would like to discuss anything on the above please do not hesitate to get in contact today.

 Published by: Benjamin Wooltorton