With careful tax planning we can help you to minimise Inheritance Tax, Capital Gains Tax and even Income Tax. We can advise you on ways to ensure a smooth transfer of wealth from one generation to the next; we are also able to investigate ways of ensuring that as little tax as possible is paid during your lifetime.
Every person has what is called a "nil rate band"; this is the maximum value of assets that you can leave on your death without inheritance tax becoming payable. At the moment, the nil rate band stands at £325,000. This means that if you died and left an estate worth £335,000, the first £325,000 would be tax free, and inheritance tax would be charged on the £10,000 excess.
In some cases where a person has inherited from a spouse or civil partner, he or she may also inherit some or all of the deceased person's nil rate band, potentially increasing tax allowances on death from £325,000 to £650,000. If you think that you may be entitled to extra tax allowances, we can advise whether they are available in your case.
In addition, there are various exemptions, the most important of which states that if assets are passed to your spouse or civil partner they are free from inheritance tax. Any assets that are subject to tax are charged at a rate of 40%.
There are a number of ways that you can reduce the chances of inheritance tax being charged. We have divided these between steps you can take during your lifetime and upon death (i.e. through well prepared Wills).
Lifetime planning to reduce IHT
You could reduce the size of your estate by giving assets away. You must be very careful that you do not continue to use an asset you have given away as this would result in a Reservation of Benefit. For Inheritance Tax purposes this would mean that you would be treated as though you had never given the asset away. For example you cannot transfer your house to your children and then continue to live in the house without paying a full market rent. Despite this rule, tax can still be saved by making lifetime gifts. We can advise you on the tax exemptions available.
IHT planning through wills
Efficiently drafted Wills coupled with good financial management can provide substantial tax savings upon death.
It is extremely important to maximize the use of the available exemptions for tax through your Will, otherwise the exemptions could be lost. We will tailor your Will to your circumstances to ensure that this advantage is maximized.
IHT planning after a death
If someone you know has died without a tax efficient Will, or without a Will at all (intestate), it may still be possible to re-arrange the way they have left their assets (and this includes jointly owned property) to take advantage of the tax exemptions that are available. There are time limits within which steps must be taken, so do not delay in discussing this with us.
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