Protect your wealth and secure your family's future
Without careful planning and proper advice, HM Revenue & Customs (HMRC) becomes the largest beneficiary of your estate. The reality is that a significant portion of your wealth, including assets such as your family home, investments, life assurance plans not in an appropriate Trust, and even treasured family heirlooms, could be subject to IHT upon your death.
When Is Inheritance Tax Applicable?
Your estate becomes subject to IHT if its value exceeds the individual nil-rate band, currently £325,000, at the time of your death. Calculating the payable amount can be straightforward in some cases. You tally up all your assets, subtract the nil-rate band and the residence nil-rate band (RNRB) if applicable, and the remaining amount is taxed at a rate of up to 40%. Your estate settles this tax.
If your spouse predeceases you without exhausting their nil-rate band, the unused portion can be transferred and used upon your demise. Please note that tax relief depends on individual circumstances, and the levels and bases of taxation and reliefs from taxation can change anytime.
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The Residence Nil-Rate Band Explained
The government has introduced an additional nil-rate band, known as the ‘residence nil-rate band’, which currently stands at £175,000. This is in addition to the £325,000 nil-rate band. Therefore, if you leave the home you resided in before your death to your children or grandchildren, they won’t have to pay IHT on the first £500,000 (£325,000 nil rate band plus the £175,000 residence nil-rate band) of its value if they sell it.
You can combine your nil-rate bands for married couples or those in a registered civil partnership. This means the first £1,000,000 of your assets, including your property, are exempt from IHT. However, it’s rarely as straightforward as it sounds. There are complicated rules and calculations to consider when determining how much IHT your family will have to pay.
Planning for Inheritance Tax
Effective IHT planning ensures that your estate goes to your chosen beneficiaries rather than HMRC while maintaining flexibility and control over all arrangements made.
Create a Will
Start by drafting a Will that accurately expresses your wishes regarding the distribution of your wealth. We can assist you in planning it correctly to maximise tax savings.
Consider Giving Gifts
You can reduce the total value of your estate by gifting your family while you’re still alive.
Opt for an IHT-Efficient Fund
Some products allow your estate’s beneficiaries to meet a potential IHT tax liability without disrupting family wealth.
Remember, the levels and bases of taxation and reliefs from taxation can change at any time, and the value of any tax relief depends on individual circumstances.