Tax & Estate Planning
When you’ve worked hard across your lifetime to build your wealth, you want to ensure that future generations derive maximum benefit.
Maximise your legacy
Many people work hard to build their wealth so they have enough to pass on to future generations and give them a head start in life. The legacy you leave behind can make a huge difference to your loved ones, helping them to fund their education, get on the property ladder, start their own business or even get them prepared for a fulfilled retirement.
In order to maximise the legacy you leave behind, it is vital to ensure that you think about Inheritance Tax early on and put plans in place to mitigate your potential liability.
What is Inheritance Tax?
Inheritance Tax (IHT) is a tax payable on the estate of someone who has died. An estate includes all of a person’s property, possessions and money.
After their death, the executors of a person’s Will are responsible for calculating the value of their assets and deducting any liabilities (i.e., debts). What remains will be liable for Inheritance Tax.
How much Inheritance Tax do I have to pay?
IHT is payable at 40% on anything in your estate that exceeds the nil-rate band. The nil-rate band is a tax-free allowance that is currently set at £325,000. For people who are passing their assets onto children, grandchildren or other close family members, an additional allowance of £125,000 is available, called the residence nil-rate band. This can bring an individual’s total tax-free allowance to £500,000.
Spouses have the ability to transfer any unused nil-rate band to the other upon death. This means that if, for example, a wife predeceased her husband without using any of her IHT allowance, and he then left the family home to their children when he died, their combined IHT allowance would be £1 million.
What can I do to mitigate my Inheritance Tax liability?
Thinking about IHT early on in the financial planning process will give you the greatest number of options when it comes to mitigating your tax liability.
You can use a combination of the following options:
- Spending your money (this will reduce the value of your estate for IHT purposes)
- Ensuring you have a Will in place
- Making lifetime gifts
- Using your tax-free allowances
- Using your exemptions
- Using any available tax reliefs
- Using life insurance
- Using trusts
- Making tax-efficient investments.
As you can see, there are a great many factors to consider when planning how to best leave behind a meaningful legacy for your loved ones. It’s important to work out what the right course of action is based on your personal circumstances. Seeking the right advice, as early as possible, is crucial in helping you make informed decisions about your family’s future.
By starting to plan now, you’ll be in the best position to mitigate the potential IHT liability payable on your estate. We can assess your current financial situation as part of a holistic financial review, which will help to identify the size of your potential liability, and make appropriate recommendations to suit your objectives.
The benefits to the treatment of tax will depend on your individual circumstances and may be subject to change in the future.
The Financial Conduct Authority (FCA) do not regulate Inheritance Tax Planning, Tax and Trusts.
