Inheritance Tax

Inheritance Tax (IHT) is the tax paid on your estate before it can be passed on to your beneficiaries. Careful planning can reduce the tax paid, allowing you to keep wealth in your family.

At a rate of 40% tax, it’s not surprising that IHT is an unpopular tax. We work hard, invest for our futures and build businesses. We pay income tax (on our salaries and investment income), pay capital gains tax when we sell assets. And then, we pay IHT on the wealth that we have generated, with a view to passing this onto our children.

By being proactive there are simple ways and means of reducing your inheritance tax charge.

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Inheritance Tax Advice

How do you reduce Inheritance Tax?

One way to reduce your Inheritance Tax liability is to reduce your estate during your lifetime. Every individual has different financial goals, so you should seek professional advice before taking any action. Some possible ways Aspen Waite can advise on reducing Inheritance Tax include:

  • Make sure you have a Will - and leave everything to your spouse or civil partner, resulting in an IHT threshold of £650,000.
  • Give tax-free gifts of up to £3000 each year, or £5000 for a child’s wedding (£2500 for grandchildren).
  • Give nominal gifts out of income but you must be able to prove a trend, not deliberately giving away capital.
  • Place assets in a trust - this could be used to benefit your children, in the future when they are old enough to be responsible.
  • Leave something to charity - if you leave at least 10% you’ll pay 36% IHT instead.
  • Consider various reliefs available - including Business and Agricultural Property Relief.
  • Spend it! Many people work all their life and they don’t enjoy it - but you should carefully consider affordability as you don’t know how long you will live.
Frequently Asked Questions about Inheritance Tax Advice

Frequently Asked Questions

What is an estate?

An estate refers to the money, land, possessions, properties and other assets owned by a person, after debts and funeral costs.

What is a Will?

A Will is a legal declaration of a person's wishes regarding the disposal of their estate after their death. It is estimated around 60% of the adult population do not have a Will.

What is the rate of Inheritance Tax?

Inheritance Tax is currently taxed at a rate of 40%.

What is the current Inheritance Tax Threshold - (also known as the Nil Rate Band (NRB))?

The Nil Rate Band is a tax-free allowance of £325,000 for a persons estate. This is the amount of wealth a person can have before paying Inheritance Tax. On death, your NRB transfers to your spouse or civil partner, effectively doubling the threshold before IHT to £625,000.

What is the Residence Nil Rate Band (RNRB)?

The Residence Nil Rate Band, also known as the Home Allowance, is an additional £125,000 (as of the 2017/2018 tax year) allowance, rising to £175,000 in 20/21. RNRB provides an additional allowance to reduce IHT against your home when it is left to your children or grandchildren.

What is a Trust?

A Trust is a way of managing assets for people outside of your estate - therefore they are exempt from IHT. There are various types of trusts for different requirements.

How Aspen Waite can help

At Aspen Waite, we can look at ways to help you mitigate against Inheritance Tax, or eliminate it completely through tax-efficient strategies. Our advice is tailored to you, based on a full review of your personal wealth and wants for the future.

As part of our IHT service, we can also advise on trusts, effective remuneration planning, capital gains tax as well look after your personal tax return.

Contact one of our team for more information on Inheritance Tax, and plan for your future, today.

Get in touch for expert advice and solutions for you or your business.

Call us on: 01278 445151