Inheritance Tax Planning Options

The Office of National Statistics has reported that Inheritance Tax (IHT) paid to the Government rose by 8% last year, largely driven by the recent recovery in property prices.  With the nil rate band (value of assets upon which IHT is charged at 0%) frozen at £325,000 until at least 2018 this should ring warning bells for many that unless they address IHT planning now a larger part of their estate may eventually be subject to the tax and less will pass to their chosen beneficiaries.

The good news is that under current IHT legislation there is much that can be done within the rules to mitigate any potential charge to IHT.  The most important point to remember though is that acting early gives you more options.  Although that is not to say that nothing can be done later in life as well.

Traditional routes for mitigating IHT include gifting and insuring away the liability.  Unless gifts are in excess of £325,000, this route takes 7 years for assets given away to fall outside of the estate and insurance can be costly.

Another simple route to help with IHT liabilities is to ensure that you use available exemption reliefs such as your annual allowance and gifts out of income; although the amounts can be limited and may not make large inroads into any potential Inheritance Tax liability.

Other less common, but effective, methods of IHT planning can only be offered though financial planning and advice firms.  These include mitigating tax through the use of flexible Trust arrangements and utilising other tax reliefs such as Business Relief.  These can provide significant advantages such as continued income streams and access to capital; unlike gifting where the donor has no right to any income or capital back from the gift. They can allow ongoing control of any capital used and crucially, immediate Inheritance Tax savings or, using Business Relief solutions, 100% exemption from Inheritance Tax just two years after any initial investment.

Swindells Financial Planning are experts in providing IHT planning; we review clients circumstances to asses any liability, listen to your goals in life and help plan to meet these and offer expert IHT mitigation solutions that has you and your beneficiaries at the core.  We review this plan with you regularly to ensure you remain on course to meet your goals and help minimise the tax you may pay on what you wish to pass to your beneficiaries.