Inheritance Tax Planning

What is Inheritance Tax (IHT)?

Inheritance Tax (IHT) is a tax that may be levied on your estate when you pass away. It applies to the total value of your assets, including property, money, and possessions, that exceed a certain threshold known as the nil-rate band. As of the current tax year, the nil-rate band is set at £325,000. This means that if your estate is valued below this amount, no IHT is payable.

Why is IHT Important?

Understanding IHT is crucial for effective estate planning. Failing to address potential tax liabilities can result in significant financial burdens for your beneficiaries, potentially reducing the inheritance they receive. By planning ahead, you can implement strategies to mitigate your IHT exposure, ensuring that more of your wealth is passed on to your loved ones.

How is IHT Calculated?

IHT is typically charged at 40% on the value of your estate above the nil-rate band. However, there are various reliefs and exemptions that can apply, such as:

Residence Nil-Rate Band (RNRB): An additional threshold that applies if you pass your home to direct descendants (children or grandchildren). As of 2024, the RNRB can add an extra £175,000 to the threshold.
Gifts: Any gifts you make within seven years of your death may also count towards your estate’s value for IHT purposes. However, gifts below the annual exemption limit (currently £3,000) are not counted.

"Effective inheritance tax planning: securing your legacy, preserving wealth"

How Can You Reduce IHT?

There are several strategies to consider when planning to reduce your IHT liability:

Gifting: Regularly gifting within the annual exemption limit can help lower the value of your estate over time.
Trusts: Setting up a trust can help protect assets from IHT and ensure they are distributed according to your wishes.
Life Insurance: Taking out a life insurance policy written in trust can provide funds to cover IHT liabilities, preventing your estate from being depleted.

Start Planning Today

Protect your legacy and provide peace of mind for your loved ones. Begin with a free initial consultation, and let us guide you through creating a professionally crafted Will. Ready to get started? Book an appointment today.

Seek Professional Guidance

Navigating the complexities of Inheritance Tax (IHT) can be challenging. It’s always best to seek professional advice when exploring inheritance tax planning options. A qualified estate planning specialist, like those at Legatum Planning, can provide you with tailored guidance and the right solutions for your particular circumstances.

For more complex situations, it’s crucial to seek specialist tax advice to ensure all aspects of your estate are handled effectively and in compliance with current tax laws.