Inheritance Tax Mitigation Planning
Inheritance Tax Mitigation Planning experts based in Northamptonshire.
Often referred to as “the voluntary tax”, this insidious tax, levied at 40% of the value of all Estates valued at over £325,000, can be legally mitigated and often negated totally.
Each and every individual tax payer in England and Wales has a “nil-rate band” entitlement, which is currently set at £325,000 (September 2013). The government has already told us that this will be frozen until at least 2018.
If your Estate does not exceed the “nil-rate band” – the total value of all the assets you own within your Estate, your Estate will not be liable for Inheritance Tax. However, if your Estate exceeds the value of the “nil-rate band” – the excess will be taxed at 40%. So, if your Estate were valued at say £425,000 i.e. £100,000 over the “nil-rate band”, the bill payable to the tax man would be £40,000.
An announcement has been made in the 2015 budget that each person in a married relationship or civil partnership may also be entitled to a second nil-rate band entitlement of £175,000 (max). this is provided that the Estate includes a family home which is being passed on to that couples’ children. This additional allowance will be applicable on a rising scale from 2018-2021.
Married persons and Civil Partners can take advantage of the allowances in place currently which on the death of the first person in such relationships mean that any tax payable is “held over” until the death of the second. At that point, both persons allowances (i.e. 2 x £325,000) are taken in to account and the Inheritance Tax liability is calculated and becomes payable if applicable.
We can suggest measures both within the Will and outside it through Lifetime Trusts and other mechanisms which, given certain time constraints, could mitigate or even negate this tax for you
N.B. The above is intended as a general guide only. Please refer to us for fuller details of your own personal circumstances which may affect the calculations. Certain measures are time sensitive, i.e. a period of time must elapse for them to be effective.
Some Simple Inheritance Tax Saving Ideas!
Inheritance Tax has been in the news a lot recently with the latest budget from Mr. Osborne adding a further nil-rate band to the existing one to collectively give each individual an allowance in Inheritance Tax of £500,000 (provided it includes a main residence being passed to children).
Inheritance Tax is still an insidious tax, because it taxes at 40% after your death on all the items you’ve already paid tax on during your lifetime. However, with careful planning, most Inheritance tax burdens can be mitigated very successfully or even completely with reasonable ease.
1. The most obvious answer is to spend your money being careful not to amass items which will add to your Estate such as motor vehicles, caravans, and other assets. However, holidays including cruises, and other treats on a day-to-day basis, will not amass other assets so are perfect!
2. Buy an insurance policy which will pay off any estimated Inheritance Tax liability on your death.
3. Reduce the value of your home by taking Equity Release and spending the cash. N.B. YOU MUST take carefully considered advice on this before doing so. We can put you in touch with reputable Independent Financial Advisors.
4. Give amounts away to Charity either during your lifetime or through your Will. All charitable giving (provided it is to a Charity with a charity number) is free of tax to the Charity and to your Estate.
5. Make Potentially Exempt Transfers (P.E.T’s). Giving cash or other assets during your lifetime of amounts up to the nil-rate band, will be potentially liable to Inheritance tax if your Estate is over the nil-rate band. However if you give the gift and then survive seven years, the gift is no longer considered to be within your Estate for inheritance tax purposes.
6. Making gifts to Trusts is another effective way of giving assets away and can be done in exactly the same way as giving an outright gift as in the previous example. But, a gift given within a Trust and with you appointed as a Trustee, means you retain control over the distribution, timing and many other factors.
If you or anyone you know is looking for more help and guidance regarding Inheritance Tax Mitigation Planning, then please give us a call for a confidential, no obligation consultation. We are able to visit you in your own home at a time that is most convenient for you.
We cover the following areas; Northamptonshire, Warwickshire, Buckinghamshire, Oxfordshire, West Midlands, London and The Home Counties.