Concerned about Inheritance Tax? Advice is available Article Image

Concerned about Inheritance Tax? Advice is available

Family fortunes are often lost through a reluctance to confront the issue of Inheritance Tax, but as Sandro Forte of the Forte Financial Group discusses, there are measures you can take.

There are few more confusing – or unpopular – taxes than Inheritance Tax (IHT). For older generations, the prospect of paying up to 40% tax on what they leave behind is difficult to contemplate. For some children and grandchildren, grappling with IHT is something they are ill-equipped to do; yet more and more families are having to deal with it.

What is more, IHT is set to be an even greater money-spinner for the government over the next few years: the amount collected has passed £5 billion for the first time in 2017/18 (Source: HMRC, November 2017) and the Office for Budget Responsibility predicts that receipts will increase to £6.2 billion by 2021/22.

Nevertheless, despite more than a third of over 55s being concerned about having to pay IHT on their estate, less than a fifth have actually taken action to reduce their potential tax bill. Fewer than one in ten are seeking financial advice or making gifts to family members (Source: Prudential, May 2017).

You can make gifts worth up to £3,000 in each tax year (£6,000 if you use the previous year’s allowance as well) without incurring any IHT. You can pass on larger amounts of money free of IHT so long as you live for seven years after making the gift. You may also want to take account of the “normal expenditure out of income” rule – if you make gifts out of your income and, in so doing, don’t affect your standard of living, they are exempt from IHT and there is no upper limit.

Many individuals have the desire and ability to give away some of their wealth during their lifetime. Indeed, this is becoming increasingly necessary as families look to use their combined resources in the best, most tax efficient way to benefit all generations. Gifting while you are still alive can be very rewarding.

Moreover, taking steps to reduce your taxable estate by topping up a child’s pension or Junior ISA could go a long way to providing them with an individual head start in life.

The establishment of a Trust may affect the timescale over which your gift may be considered exempt, so advice should be taken if you are considering a gift into a Trust or you are looking to set one up.

What action can you take?

To find our more about Inheritance Tax, contact Sandro Forte, CEO of the Forte Financial Group on 0208 723 8370.


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