Inheritance Tax Planning

For individuals living permanently in the United Kingdom, Inheritance Tax (IHT) is potentially a tax on the value of everything you will own at death above the HM Revenue & Custom's (HMRC's) allowance threshold, known as the "Nil-Rate Band".

The Nil-Rate Band applicable for the current tax year (from 6 April 2011 to 5 April 2012) is £325,000. To the extent that an individual's total savings and assets exceed £325,000 then, in the event of that person's death, IHT will be levied at 40% on the excess. For example, if Mr Smith were to die today leaving behind savings and assets valued at £425,000 then there would be no tax on the first £325,000 but the excess of £100,000 would be taxed at 40%, resulting in an IHT liability of £40,000 to be paid by Mr Smith's executors out of his estate. It is worth noting, however, that there is usually a complete exemption for assets left to a surviving spouse or registered civil partner. Consequently, if Mr Smith were to leave his entire estate to his wife, Mrs Smith, then there would be no IHT to pay on Mr Smith's death.

In recent times, HMRC have becoming increasingly strict when vetting claims for IHT exemptions and reliefs. Nevertheless, with expert advice and advanced planning it remains possible to reduce an individual's exposure to IHT through a variety of different tax mitigation techniques, including making timely gifts to family members or family trusts or investing in specific types of relievable asset. We are experienced in providing IHT mitigation advice of all kinds, and particularly to those with high net worth and complex estates.

Contact: Stuart Thorne