Personal Legal Services » Wills, Probate, Tax & Trusts » Inheritance Tax Planning
When it comes to inheritance tax, it’s essential to ensure your Will is appropriately structured. Our team of tax planning experts can speak through your options. The good news is that several exemptions and allowances can be applied to limit damage to your legacy.
Contact our Inheritance Tax Planning Solicitors at Taylor Emmet
The rules and regulations relating to inheritance tax can be complicated. Our team of tax planning experts can speak through your options.
With many rules and regulations to consider, inheritance tax can be complicated. But don’t worry, we’re experienced in dealing with various circumstances, so we’re best placed to advise you.
Some important considerations
The nil rate band
The current main inheritance tax threshold (known as the nil rate band) is £325,000 per individual.
The value of your estate in excess of this figure will be taxed at 40%, although there are allowances that can be applied.
Since 2007, any unused nil rate band can be passed to a spouse or civil partner and used on their death.
Exemptions
Exemptions
- Spouse/civil partner exemption: Assets inherited by a spouse or civil partner are free from tax regardless of value. This is without limit, except in cases where one partner lives in the UK and the other does not. To qualify, you must be legally married or have a registered civil partnership.
- Gifts to charities or political parties: All gifts to UK registered charities are exempt from inheritance tax. For a political party to qualify, it must have at least one member of parliament.
- Gifts for public benefit/national purposes/to organisations and standard items of public importance: Any of these can be exempt, but it is a specialist topic, so please contact us for further advice.
- Gifts for the maintenance of family: Any gift for the maintenance of a child under 18, or older if they are in full time education or training, is exempt from inheritance tax. Likewise, maintenance paid for children who are physically or mentally disabled is also exempt. In all cases, the gift must be reasonable for the child’s needs.
Lifetime exemptions
Lifetime exemptions
- Potentially exempt transfers: unlimited amounts of money can be given to individuals and these will be exempt from inheritance tax, as long as you survive the gift by seven years. Taper relief, which reduces the tax payable, may be applied if the seven-year threshold is not reached. If you decide to make a gift of this nature, you must not ‘reserve the benefit.’ This means you cannot continue to benefit from it once it has been given away.
- Annual exemption: You can gift up to £3,000 a year free of inheritance tax without having to survive it by seven years. If you haven’t used your exemption, it can be carried forward for one year, allowing you to give away £6,000.
- Small gifts: Up to £250 can be given in any tax year to any number of individuals. Such gifts are only exempt from inheritance tax as long as the total amount any one person receives is not more than £250.
- Gifts in consideration of marriage or civil partnership: You can make the following gifts free of inheritance tax to a person who is getting married or entering a civil partnership
– £5,000 if you are a parent
– £2,500 if you are a grandparent
– £1,000 in any other case
To qualify, the gift must be made on or shortly before the wedding or registration, to one or both parties and the exemption only becomes fully effective when the union takes place.
- Normal expenditure out of income: You can make regular gifts free of inheritance tax, provided they are made out of your income and leave you with sufficient means to maintain your usual standard of living. This can be a very valuable exemption and is often overlooked. Please take advice before making your first gift to ensure it qualifies.
Reliefs
You should be aware that reliefs may reduce the value of a gift or transfer for inheritance tax purposes by 50% or 100%.
The latter effectively makes the asset exempt. There are complex rules associated with these reliefs, so it’s important to take advice early to ensure your asset qualifies.
Types of reliefs
- Business property relief: If assets are used by a business, but owned by a proprietor, shareholder, or trust in which that person is a life tenant, then 50% business relief will be available.
- Agricultural property relief: Agricultural land, farmhouses, cottages, and other ‘character appropriate’ farm buildings may receive relief at 50% or 100%.
What next?
The rules and regulations relating to inheritance tax are complicated, but our expert team can discuss the allowances available in detail, calculate the liabilities on your behalf and apply for the appropriate exemptions. We can also talk through the options available to minimise the tax payable on your death.
Our tax planning specialists are ready to guide you through the process. Get in touch with us today to speak to our team. Call us on 0114 218 4391, email our Client Services team PrivateClient.ClientServices@ or complete our online enquiry form.
More Information
How Inheritance Tax works: thresholds, rules and allowances – Gov.co.uk
