Inheritance tax receipts at record level

Revenues from Inheritance tax have increased significantly to the highest levels since the tax was introduced in 1986.  The introduction of the new Main Residence Allowance in April next year may impact these figures in future years but for some people Inheritance Tax is still very much a concern.

Here are few things to consider to make sure you cover all the planning opportunities:

• Take professional advice and make a Will to ensure spousal exemptions are maintained and any transferable allowances between spouses are available and carefully considered. Any proposed gifts to charities will also be tax free.
• Use your gift allowances. The annual exemption allows you to give away up to £3,000 free of IHT  each year. In addition you can gift up to £5,000 to a child, £2,500 for a grandchild or great grandchild, per person for wedding or civil ceremony gifts. You can also give away as much of your surplus income as long as it is regular, cannot be argued to be capital and leaves you with sufficient monies to maintain your usual standard of living.
• Consider making a significant capital gift if you can afford it and no other tax such as Capital Gains taxes are triggered.  You can’t retain any benefit in any assets gifted and you have to survive 7 years from the date of the gift before it falls outside of your estate for IHT calculation purposes.
• Making gifts to Trusts can reduce your estate and the IHT bill, if you do survive seven years. However, you can retain some control by being a Trustee. Some Trusts allow you to receive regular payments from the capital but you will need to take professional and financial advice before considering these products.
• Take financial advice and consider putting money into your pension plan. If you were to die before the age of 75 any benefit is paid tax free, should death occur at or after age 75 any benefit is taxable on the beneficiary at their marginal rate of tax.
• If you run a trading business or you own a farm, that asset could qualify for 100% relief from IHT, depending on the circumstances.
• You can take out life insurance which pays out on your death.  The proceeds can be used to pay the IHT. You need to be able to afford to  pay a regular monthly or yearly premium to an insurance company to pay an amount to cover the estimated liability on your estate.

You should seek professional advice as succession and Estate planning is a complex area. For more information on estate planning please contact Neil Raiseborough on 01926 356042 or email: neil.raiseborough@alsterskelley.com