Independent Financial Advice - Inheritance Tax
We have unrestricted access to all financial services and mortgage providers so please contact us for a simple no nonsense approach to financial advice. All costs will be discussed at our first FREE meeting and we can work on a fee or commission basis to suit you.
Inheritance Tax
With the
dramatic rises in property values seen since the 1970s and the increases
in investment values in the 1990s, many people could now find that the
value of their homes and investments adds up to more than £300,000, the
level at which Inheritance Tax (IHT) can become payable for the tax year
2007/2008.
In simple terms, IHT may become payable when you die based on the net
value of your estate and taking into account any chargeable gifts that
you have made in the previous 7 years. Some gifts may even incur an
immediate tax charge.
Each individual is entitled to an amount on which no IHT is payable,
known as the Nil Rate Band (£300,000 for the tax year 2007/2008). If the
net value of your estate is more than this figure, then the excess is
potentially liable to IHT at the current rate of 40%.
Gifts between husband and wife
There is an important exemption, known as the Spouse Exemption. Any
gifts between husband and wife, whether during their lifetimes or on
death, are usually free from IHT. Therefore, if everything is left to
the survivor on the first death, no IHT will be payable at that time.
All too often, however, the Spouse Exemption is used in isolation on the
first death with the result that the Nil Rate Band, available at that
time, is wasted. This often means that IHT is needlessly incurred on the
second death.
How a Will can help reduce IHT
By taking advantage of IHT exemptions and reliefs, a correctly drafted
Will can save tax. If you are married, you should examine the
possibility of rearranging your estates so that you are each in a
position to make effective use of the Nil Rate Band on the first death.
This could result in savings of up to £110,000 (at 2003/2004 rates). For
more information
Contact Us
.
Making Lifetime Gifts
A further way of reducing your liability to IHT is to give away assets
while you are alive. Some gifts are immediately exempt from tax when
they are made but most will only escape tax if you live for a further
seven years.
Understandably, many people are concerned about giving away capital and
the income that goes with it for fear that they, or their spouse, could
face financial hardship at some date in the future. Loss of control is
another important factor.
Gifts with reservation
To be effective for IHT purposes, a gift must be outright and
unconditional. If there are any 'strings attached', it will be
considered as a 'gift with reservation' and will be rendered invalid for
IHT purposes.
So how can these
problems be removed?
By rearranging how
your investments are held you can:
-
gradually lower the value of your estate and reduce your IHT
liability
-
ensure that any future growth on your capital accrues outside your
estate and therefore passes free of IHT to your beneficiaries
-
still receive a regular tax efficient 'income' (and retain access to
the balance of your original investment)
-
retain a high degree of control over who will finally benefit when
you die.
For more information
on any of these topics please
Contact Us
* Based on 2007/2008
tax year
|
