Inheritance Tax Planning.

As we age, we are more likely to start thinking about our legacy and how best it can benefit those we care about most.

How can you ensure that your legacy is passed on to your loved ones without it being eaten away by taxes? Estate planning is the answer. This the process of transferring your assets in accordance with your wishes in a tax efficient way, both during your life and after your death.

HM Revenue & Customs charge inheritance tax (IHT) on the estate of a deceased person. Your estate is made up of all your assets, including savings, investments, and property. The first £325,000 in your estate is exempt from IHT and there is an additional exemption that can be applied against your main residence After that, everything above this amount is taxed at 40%. Most commonly, the tax is paid by those who inherit your estate (other than your spouse or civil partner). It is usually paid before the estate is distributed to beneficiaries.

There are several ways of reducing your inheritance tax bill. The simplest is to make a Will, leaving all of your assets to your spouse. For more complex strategies, you will need to plan over a longer period of time and seek professional advice. Some ways you can reduce, or even eliminate, the inheritance tax you owe are:

  • Giving gifts to loved ones, family members and charities.

  • Taking out a life insurance policy to cover your tax bill.

  • Gifting to a range of different trusts.

  • Investing in Business Relief qualifying investments.

It is a complicated area that normally requires forward-thinking and expert advice. Each individual situation is different, and the government can and do change the laws and rules over time.