Inheritance Tax
Inheritance Tax can be a major issue as it is a tax on your assets on which tax has all ready been paid. Without careful planning all of your assets could eventually become liable to the tax. But does it have to? The "Death Tax" has often been described as the "voluntary tax".
The value of estates above the threshold of £650,000 for couples in the tax year 2009/10 and £700,000 by 2010/11 is taxed at 40%. People who have been widowed will also benefit by being able to use any unused portion of their deceased partner's allowance when they die. So if all the estate was left to a surviving spouse, for which there is no IHT payable, that surviving partner will have the whole £650,000 allowance. For single people the Nil Rate Band is half of that for couples.
Generally the largest part of anyone's estate is their home and as the Inheritance Tax threshold has not increased over the years in line with house price inflation so the estates of home owners continue to suffer increased Inheritance Tax, although the latest changes will go some way to alleviating that problem. The annual exemptions have also not been increased for many years so the ability to give assets away continues to reduce in real terms.
Inheritance Tax has many exemptions and reliefs and a useful starting point is to consider them. However, taking advantage of them in practice can be quite complex. A bespoke solution to inheritance tax is necessary as it will depend on the circumstances of each case. For example, what do your assets consist of and to what extent do you need them to generate income? Crucially, particularly for married couples, what flexibility is needed in terms of future access to capital or income, perhaps after the demise of the first to die?
A range of inheritance tax solutions is available which, individually or in combination, can meet most people's objectives and circumstances, and achieve a great deal. However, individual advice is essential. Please contact us for personal advice.
Current tax rates and bands can be found here at the governments own site.
Please note that Inheritance Tax is not regulated by the Financial Services Authority.