Inheritance Tax Planning during your lifetime or on death
If at the time of your death you have an estate over the nil-rate band (currently £325,000) or if you have made substantial gifts in the seven years prior to your death, then Inheritance Tax may be payable on your estate.
If your net assets exceed this sum then anything over this amount is taxed at 40% unless there are exemptions available to you. Here are the most useful exemptions:-
- Assets passing to a spouse or civil partner are exempt from Inheritance Tax. The Transferable Nil-rate band is also available to couples who are married or in a civil partnership which may allow for an exemption of up to 650,000 on the death of the second to die.
- Gifts to UK Charities and some institutions such as museums, universities, churches and the national Trust are exempt from Inheritance Tax. Where at least 10% of a persons net estate is left to charity upon death the rate of tax charged is reduced to 36%.
- Business Property Relief and/or Agricultural Property Relief may be available where certain conditions are satisfied. This can reduce the Inheritance Tax payable on business or farming assets on death. Not all businesses/ farms qualify for relief and this will depend various factors such as the type of assets owned and the length of ownership.
There are things that you can do during your lifetime to reduce the tax payable on your death. You can consider making outright gifts or gifts into trust. If you have excess income then this can be gifted without incurring further tax liabilities. Including charities or trusts in your Will can reduce the tax payable as can financial planning.
Specialist advice should be sought when considering tax planning and Jennifer Melly Law can assist with this.
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