Inheritance Tax (IHT) has come under the spotlight over the past few years; the Office of Tax Simplification have conducted a couple of reviews on the unpopular tax, which was left untouched in the Spring Budget. The good news is that, with expert planning, you can legitimately reduce the amount of IHT payable to HM Revenue & Customs and pass on assets to your family as intended.
IHT thresholds – know your numbers
For individuals, the current IHT nil-rate threshold is £325,000, and £650,000 for a married couple or civil partners. Any unused portion of the nil-rate band can be passed to a surviving spouse or civil partner on death. Beyond these thresholds, IHT is usually payable at a rate of40%.
Since April 2017, there has also been a main residence nil-rate band, which applies if you want to pass your main residence to a direct descendant (e.g. child or grandchild). For the 2020-21 tax year, this allowance is £175,000.
Added to the existing threshold of £325,000 this could potentially give rise to an overall IHT allowance of £500,000 for individuals, or £1m for those who are married or in civil partnerships. It’s important to note that larger estates will find that residence relief is tapered, reducing by £1 for every £2 by which the net estate’s value exceeds £2m.
Take professional advice
There are a variety of ways you can reduce IHT and we can help you decide what could work best for you. If you feel that your estate is likely to be subject to IHT you should obtain in-depth professional advice that looks at all aspects of your requirements, lifestyle and goals, and develops a financial strategy that meets your needs.
For further information on Estate Planning please contact one of our advisers on 01252 626200 or download our free Key Guide: You and yours – estate planning
Our full range of Key Guides can be found at: www.sbwm.uk/resources/key-guides