Estate & Inheritance Tax Planning
Once famously described as a “voluntary tax, paid by those who distrust their heirs more than they dislike the Inland Revenue!” by the then Chancellor, Lord Jenkins in the 1980's, Inheritance Tax (IHT) is paid on death, for estates valued over a certain amount called the Nil Rate Band.
NB Lord Jenkins quote was actually in relation to Capital Transfer Tax, the predecessor to Inheritance Tax, but the principal is still the same.
Since the 1980's, increasing property prices, especially in the South East, mean more people than ever before have found their estates have become liable for Inheritance Tax.
Currently, if your estate value is over what is known as your Nil Rate Band (£325,000 for a single person/£650,000 for a couple) when you die, any surplus assets could be subject to Inheritance Tax (IHT) at a rate of up to 40%.
Eligible individuals can also claim an additional allowance of £150,000 each (£175,000 in the 2020/21 tax year) using the Residence Nil Rate Band, to offset the value of a family home on death. This is in addition to their existing £325,000 Nil Rate Band exemption.
However, the Residence Nil Rate Band reduces by £1 for every £2 on estates exceeding £2,000,000 and can only be claimed where a main residence is passing to direct descendants on death, where the amount does not exceed the property value.
There are also many Reliefs and Exemptions » available to help reduce the impact of Inheritance Tax, which should always be considered in relation to your Estate Planning needs as well as a wide range of Investment and Trust options which are acceptable to HM Revenue and Customs (Previously the Inland Revenue) to enable investors to reduce their estates potential liability to Inheritance Tax.
Pension scheme members can also reduce their family's liability to IHT on the value of the member's death benefits by leaving the funds within a pension wrapper (beneficiary's flexi-access drawdown) or having a lump sum paid to a bypass trust.
Ultimately, Estate & Inheritance Tax Planning will focus on what happens to the estate when you are no longer around and, by working with you (and your Solicitor and/or Tax Adviser), your Retirement & Later Life Advice Specialist will advise on the options available and determine the most appropriate Trust and Estate Planning plans to put in place to help you to structure your estate and financial arrangements so that your assets can pass to your beneficiaries as tax efficiently as possible. Other Tax Considerations.
Capital Gains TaxIndividuals are entitled to an annual exemption. If you think that your investments have made substantial gains and you have not yet made use of your annual exemption, you should consider taking financial advice as you may be able to utilise your annual exemption, or reinvest in an ISA (subject to the ISA limits).
Business AssetsInheritance Tax is a tax on the deceased's estate in excess of their nil rate band(s). Any ownership of a business, or share of a business, is included in the estate for Inheritance Tax purposes but in some cases could qualify for relief from inheritance tax.
Trusts can be a useful means of preserving wealth, by allowing assets to be passed down through the generations in a secure and tax efficient manner. There may be tax advantages in setting aside assets in a trust.
Tax Planning (without an investment element) is not regulated by the Financial Conduct Authority.
The Financial Conduct Authority does not regulate advice on Trusts.