Inheritance Tax Planning


There is a misconception that you only need to worry about Inheritance Tax upon death! For effective Inheritance tax planning, it should be considered well in advance ideally, although there are some options later on in life. Inheritance tax also has to be paid sometimes on lifetime transfers. Inheritance tax can be dealt with by a Solicitor or Accountant/Tax Adviser, for the best tax planning it is often best to work in combination.

There are 3 types of Inheritance Tax:

  • Lifetime transfers
  • Death Tax
  • Death Estate



There are several exempt transfers which fall outside of the Inheritance taxation regime:

  • Gifts to UK domiciled spouse/civil partner (different rules apply to non UK domiciled spouse)
  • Gifts to charities, political parties, housing associations or national heritage bodies
  • Normal (habitual) expenditure out of income, although the donor must have sufficient income to maintain his normal standard of living.
  • £3,000 Annual Exemption of which 1 year can be carry forward, but current year is used first
  • £250 Small gifts
  • £5,000 Wedding gift to a child
  • £2,500 Wedding gift to a grandchild or remoter (great-grandchild)
  • £1,000 Wedding gift from anyone else

Potentially Exempt Transfers is fully exempt if donor survives 7 years from date of gift unless there is a Chargeable Life Transfer within 7 years then a donor would need to survive 14 years!




 
 


These exemptions apply per marriage/civil partnership.

Two major exemptions that exist which can reduce an inheritance tax charge by 100% or 50% are Business Property Relief and Agricultural Property Relief.

Chargeable Lifetime Transfers are generally gifts to trusts, with the most common being discretionary and interest in possession.

If you require some assistance with Inheritance Tax planning, please contact us by calling us on 01234 300500, emailing us at [email protected] or directly to one of our team and we would be delighted to offer you inheritance tax advice.