Inheritance Tax Planning, otherwise known as IHT, is a worthwhile process and here at Ensure Inheritance we have a wealth of experience in dealing with IHT and advising clients what is best for them.
Using our expertise onTrusts, Wills Planning and gifting, we can help you minimise or remove your liability for IHT.
However, if you do nothing, 40p in every pound of your inheritance or estate above the nil band threshold could make its way into the government’s hands.
IHT Rules and Regulations
Inheritance Tax is charged at 40% on the value of anyone’s estate above the existing nil band threshold which stands at £325,000.
Money passed from wife of husband or between civil partners has always been tax free. However, the effect of this ‘‘tax free allowance’’ is to postpone the payment of tax until the second spouse’s death.
Current tax legislation allows married couples or civil partners to transfer the unused IHT allowance on the first death to their spouse when they die. This means they can now receive a combined tax allowance of £650,000.
These rules do not impose a time limit on these provisions so all widows and widowers will benefit from these arrangements no matter how long ago their spouse died. However, these rules do not cover co-habiting couples or single people.
In 2015 an additional nil-rate band was introduced when a residence is passed on death to a direct descendant.
This will be:
•£100,000 in 2017 to 2018
•£125,000 in 2018 to 2019
•£150,000 in 2019 to 2020
•£175,000 in 2020 to 2021
It will then increase in line with Consumer Prices Index from 2021 to 2022 onwards. Any unused nil-rate band can be transferred to a surviving spouse or civil partner.
The additional nil-rate band will also be available when a person downsizes or ceases to own a home and assets of an equivalent value, up to the value of the additional nil-rate band, are passed on death to direct descendants.
There will be a tapered withdrawal of the additional nil-rate band for estates with a net value of more than £2 million. This will be at a withdrawal rate of £1 for every £2 over this threshold.
Planning correctly for IHT can save your family a great deal of money when you pass on your estate. Please contact us for details of how we can help.