At their annual conference, the Conservatives proposed cutting inheritance tax (IHT) by raising the threshold to £1,000,000 but you don’t have to wait for them to win an election to escape death duties. Originally intended as a tax on the rich, 2,300,000 homes are now above the current IHT limit of £300,000 and the IHT net is expected to catch more families as assets continue to grow faster than the indexation of the threshold or Nil Rate Band. The current IHT rules mean you can still pass substantial amounts of wealth to chosen beneficiaries – providing of course your estate is arranged in a tax-efficient way.Many married couples leave their assets completely to their surviving spouse when they die – there is no IHT between UK domiciled spouses – but by doing this a nil rate band is wasted on the first death, resulting in up to £120,000 IHT being paid unnecessarily. Using a will trust arrangement can ensure that, for married couples (or registered civil partners), up to £600,000 can be passed on tax-free. Making gifts is a good way to reduce a taxable estate – the annual allowance is £3,000 per person so over a twenty-year period a married couple (civil partners) could gift another £120,000 tax-free. Investing in shares listed on the Alternative Investment Market (AIM) can lead to 100% Business Property Relief after two years of ownership, so removing the value from the estate and there is no investment limit. There are many other arrangements that can save tax without impinging on your own financial security so with the prospect of any early election now over (for the time being), now seems a good time to review one’s plans.
Alan Porter, of The Will Centre says, “IHT is a tax that can be erased from most estates by either a Nil Rate Band Discretionary Will Trust or careful lifetime planning. We help a lot of clients in this situation who have a house that puts them into the IHT risk zone of £300,000 to £600,000 when added to other assets.”
For help and advice if you are in the IHT Risk Zone call The Will Centre on 01752-607040.
