Death is not easy to discuss, which could be why inheritance tax (IHT) planning is often not given the prominence it deserves. An IHT charge can arise during your lifetime as well as at the time of death.
The tax affects people who have estates with total assets above the IHT nil-rate band, which is currently £325,000 (potentially increasing to £650,000 for married couple or those in registered civil partnerships). For many, the recent surges in residential house values are placing estate values firmly above the nil-rate band. IHT at 40% is generally payable on everything you leave in your estate above the nil-rate band.
An additional main residence nil-rate band is also available to estates where a home, or part share, has been left to an individual’s direct descendants. This will add a further £100,000 to an individual’s IHT nil-rate band from April 2017, with three further £25,000 additions in April 2018-2020. For estates in excess of £2 million the main residence nil rate band will be tapered and may not even apply at all.
We can provide qualified professional assistance to position and plan the management of your estate to reduce or negate any IHT liability for your heirs. We have expert knowledge of the range of options listed below which can be employed to optimise the transfer of wealth to the next generation:
- Annual gifting allowances
- Gifting from normal income
- Investments that qualify for business-property relief
- New pension freedom rules
- Life insurance to pay for any IHT due on your estate
- Giving to charity