a guide to inheritance tax

Currently (2006/07 tax year) the proportion of an individual’s savings and assets valued above £285,000 will be taxed at 40% on that person’s death. There is usually a complete exemption for assets left to a surviving spouse or a registered partner by virtue of the Civil Partnership Act 2004.

What can I do about Inheritance tax (IHT)?

Here are some measures you can take to tackle a potential IHT liability:

• Ensure that there is no unnecessary IHT liability. For example, a term life insurance policy will only pay up on death. Ensure that the proceeds of this policy are written under an appropriate trust and do not fall inadvertently into your estate;

• Make gifts during your lifetime. There are various exemptions some of which are generous. A more detailed (but not exhaustive) explanation is contained in the next section;

• Own assets that will have an IHT exemption on your death. For example some shares quoted on the Alternative Investment Market will have a complete exemption from IHT in some circumstances (the Chancellor may change the definition of what property is exempt from IHT on death before you die); and

• Create a sum outside of your estate which can be used to pay the IHT that will be due on your death.