Inheritance Tax Issues

The only things that are certain in life are death and taxes - Benjamin Franklin


What is inheritance tax?

Inheritance tax (IHT) is a tax that is charged on the total value of your estate on death, plus certain lifetime transfers made during the previous seven years. If the total value of your estate exceeds the nil rate band (set at £325,000 for the tax year 2009/10 and £350,000 for the tax year 2010/11) then your estate will be taxed.

Wealth that you pass to your spouse (or civil partner), provided they’re UK-domiciled, is free of IHT.

Each person has their own IHT nil rate band allowance. With careful Will planning, married couples (and civil partners) could combine both their allowances in order to double the amount that can be left to their beneficiaries IHT free (£650,000 for 2009/10).


How much is the tax?

IHT is levied at 40% on the value of your worldwide assets above the IHT nil rate band. The following table lists some examples for a married couple for the tax year 2009/10.

Tax Table

 


Minimising your IHT liability

If like most people, you feel that you have paid enough tax during your lifetime you should seriously consider the steps you can take to minimise your IHT liability.

There are numerous strategies that can help minimise your IHT liability depending on your circumstances and wishes.

You can reduce the size of your taxable estate by spending your money or gifting the money or assets. IHT mitigation strategies exist which remove the bulk of your assets from your estate, either immediately or over a seven year period, without depriving you and your beneficiaries of flexible access. You may also set up a ‘Whole of Life’ assurance policy in trust in order to meet the tax liability on your death.

For further information please contact us.


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