Inheritance Tax,
Or The Dreaded IHT
While there isn’t much that can be done about the former, we’re on hand to help with the latter. Research shows that as many as 30 million people are paying too much tax, and we want to make sure you’re not one of them! Managing your affairs efficiently can help you to save a significant amount of money that your family— or whoever you choose— could put to good use.
While inheritance tax (IHT) is charged to your estate upon your death, in certain circumstances, it can be charged during your lifetime. However, with careful planning and an experienced financial team by your side, you may be able to reduce your potential liability without needing to set up expensive and complicated trusts. You’ve worked hard and paid taxes your whole life to accumulate your assets— now it’s time to make them work for you.
Benjamin Franklin 1789
IHT: Not Always So Unavoidable
IHT is often dubbed ‘Britain’s most hated tax’, but it doesn’t need to be that way for you. With the appropriate strategies, and assuming you don’t leave matters too late, this is an entirely avoidable tax for many. However, the rules governing potential actions are incredibly complex, so it’s a good idea to have a reliable and knowledgeable financial planner to help.
The Greenfields Financial
Management Way
IHT calculators can be a good guide, but as they’re not as personalised as you need your approach to be, they can’t be relied upon to do your inheritance tax planning for you. You need tailored, one-on-one guidance that understands who you are as a person and where you plan for your money to end up. Our experienced and resourceful team is here to help with just that.
At Greenfields Financial Management, our process for inheritance tax planning is to first make a plan, and then support it with implementation. This can look entirely different from one person to another, which is why we tailor our approach to you. Whoever you’d like to leave your financial legacy to, we’re on board to help make that happen whenever the time comes.
Want to make IHT your friend, not your foe?
For advice you can rely on, organise a time with our team.
The Benefits Of Inheritance
Tax Planning
The benefits of inheritance tax planning include:
- Maximising the amount of inheritance passed on to beneficiariesBy planning ahead, you can minimise the amount of inheritance tax that will be owed, ensuring that more of your assets are passed on to your loved ones.
- Avoiding the need to sell assetsIf your estate is subject to inheritance tax, your beneficiaries may be forced to sell assets such as property or investments to pay the tax bill. Effective planning can help avoid this.
- Protecting family businessesInheritance tax planning can help protect family businesses from being sold to pay inheritance tax, ensuring that the business can be passed onto future generations.
- Reducing the administrative burdenEffective inheritance tax planning can simplify the administration of your estate, making it easier for your beneficiaries to receive their inheritance.
- Peace of mindInheritance tax planning can provide peace of mind, knowing that your loved ones will be taken care of and your estate will be distributed according to your wishes.
Your Inheritance Tax Planning Questions Answered
Inheritance tax (IHT) is a tax that is levied on the estate of a deceased person in the UK. It is payable on the value of an individual’s assets above a certain threshold, which is currently set at £325,000. Assets above this threshold are taxed at a rate of 40%, but there are exemptions and reliefs available which can reduce the amount of inheritance tax owed.
IHT is typically payable within six months of the end of the month in which the individual passed away. However, in some cases, the executor of the estate may be able to make payments in instalments over a period of up to 10 years, although interest will be charged on any outstanding amount. It’s important to note that there may be penalties for late payment or failure to pay the correct amount of inheritance tax owed.
The responsibility for paying inheritance tax (IHT) usually falls to the executor of the deceased’s estate, or the administrator if there is no will. They are responsible for valuing the estate and ensuring that the correct amount of IHT is paid to HM Revenue & Customs (HMRC) within the required time frame. If the estate includes a trust, the trustees may also be responsible for paying any IHT due.
It’s important to note that if the deceased had made any lifetime gifts or transfers, it may be the responsibility of the person who received the gift or transfer to pay any applicable IHT.
Inheritance tax is currently charged at a rate of 40% on an individual’s estate value above the nil-rate band of £325,000. The residence nil-rate band, which can increase the tax-free amount to £1 million for a married couple , applies in certain circumstances such as when a family home is passed on to direct descendants.
Inheritance tax (IHT) can be due on a range of assets that are part of an individual’s estate when they die, including:
- Money in bank accounts and investments
- Property, including second homes and buy-to-let properties
- Personal possessions, such as jewellery, art, and cars
- Business assets, including shares in a private company
- Life insurance policies that are not written in trust
- Certain gifts made within fourteen years of the individual’s death that exceed the annual gift exemption threshold or are not otherwise exempt from IHT
It’s important to note that the rules and exemptions for IHT can be complex, and seeking professional advice, such as from our team at Greenfields Financial Management, can help ensure that your assets are correctly valued and any applicable exemptions or reliefs are claimed.
There are several ways in which a person can reduce their inheritance tax (IHT) liability, including:
- Make lifetime gifts— One way to reduce IHT is to make gifts during a person’s lifetime. There are certain gift exemptions and allowances that can be used, such as the annual exemption of £3,000, small gifts exemption of £250 per recipient, and gifts made as part of regular income.
- Use trusts— Certain types of trusts can help reduce your IHT liability by removing assets from your estate while still allowing you some control over those assets.
- Leave a charitable gift— You can reduce your IHT liability by leaving a charitable gift in your will. Charitable gifts are generally exempt from IHT.
- Take advantage of business property relief— If you own a business or a share of a business, you may be able to take advantage of business property relief to reduce your IHT liability. Greenfields have access to the whole market when advising on these specialist types of investment and have an excellent track record in this space.
- Use the residence nil-rate band— As mentioned earlier, the residence nil-rate band can increase your IHT threshold if you pass on a family home to direct descendants.
Remember that IHT planning can be complex, and it may be in your best interests to seek professional advice. This can help ensure your assets are structured in a tax-efficient way, and any applicable exemptions or reliefs are claimed.
It’s also important to note that the rules and exemptions for IHT can be subject to change and can depend on an individual’s personal circumstances. Therefore, it’s important to regularly review IHT planning strategies and seek professional advice.
A will is a legal document that outlines a person’s wishes for how their assets should be distributed after their death. Inheritance tax planning often involves making provisions in a will to reduce an individual’s inheritance tax (IHT) liability.
A will is a legal document that outlines a person’s wishes for how their assets should be distributed after their death. Inheritance tax planning often involves making provisions in a will to reduce an individual’s inheritance tax (IHT) liability.
A trust is a legal arrangement in which assets are transferred to a trustee, who manages the assets on behalf of the beneficiaries named in the trust. There are several types of trusts, and they can be used for various purposes, including reducing an individual’s inheritance tax (IHT) liability.
You can make gifts to your loved ones without incurring inheritance tax (IHT) by taking advantage of the various IHT exemptions and allowances available.
One of the most common ways to make tax-free gifts is by using the annual gift allowance. This allows you to give up to £3,000 each year to as many individuals as you like without incurring IHT. You can also carry forward any unused annual allowance from the previous year, which means you can give away up to £6,000 in a single tax year.
In addition to the annual gift allowance, there are other gift exemptions available, such as the small gifts exemption, which allows you to give up to £250 to as many individuals as you like without incurring IHT. You can also make gifts to help with living costs for a child or dependent relative, such as education or maintenance costs, without incurring IHT.
It’s important to note that any gifts you make will only be exempt from IHT if you survive for at least seven years after making the gift. If you die within seven years, the gift will be added back to your estate and may be subject to IHT. On some occasions the necessary survival period can rise to 14 years.
Life insurance can be used to reduce your inheritance tax (IHT) liability by placing your life insurance policy into a trust. This means that the proceeds of the policy are paid directly to the trust upon your death, rather than being paid to your estate.
By placing your life insurance policy into a trust, you can ensure that the policy proceeds are not considered part of your estate for IHT purposes. This can help to reduce the amount of IHT that your estate will be subject to.
There are different types of trusts that can be used for this purpose, including a bare trust, a discretionary trust, and a gift trust. Each type of trust has its own benefits and drawbacks, so it’s important to seek professional advice to determine which type of trust is best suited for your needs.
You can plan for inheritance tax when passing on your family home in several ways, including making use of the residence nil rate band, donating gifts, borrowing against your home, and gifting the capital, and making a will. There are stipulations within each of these methods, however, so it’s a good idea to seek professional financial advice before you proceed.
The timeframes for inheritance tax planning can vary depending on your specific situation. In general, it’s best to start planning as early as possible, ideally several years before your expected date of death. This allows you to take advantage of various planning strategies and structures that can help reduce your tax liability. However, it’s never too late to start planning, and even last-minute efforts can help mitigate the impact of inheritance tax.
To ensure that your estate is distributed according to your wishes, you may want to take steps such as making a will, considering a trust, making sure your beneficiaries are up to date, and speaking to your family and loved ones.
There are many advisors available to help with inheritance tax planning, but not everyone is suitable for everyone. Finding the right one for you should begin with making sure they’re licensed, experienced, and have a good reputation. You should also make sure that they are willing to answer your questions and provide ongoing guidance. At Greenfields Financial Management, we offer all of this and more!
As a general rule, you will need your will, trust documents, financial statements, gift records, life insurance policies, business documents, and tax returns. You may need to work with a financial advisor to ensure you have the necessary documentation for your specific situation.
Changes in tax law can have a significant impact on inheritance tax planning. It is essential to stay up-to-date with any changes and consult with a professional advisor, such as our team at Greenfields Financial Management, who can provide guidance on the best strategies to mitigate any potential tax liabilities.
To make sure that your inheritance tax planning is up-to-date and effective, you should regularly review your estate plan and keep track of changes in tax law. As these may be difficult, using a professional advisor may be a good option for you. At Greenfields Financial Management, we can offer valuable insight and guidance to help you navigate complex tax laws.
There are many resources available to help you learn more about inheritance tax planning. Some examples include:
- uk— the UK government’s website has information on inheritance tax, including thresholds, exemptions, and rules for passing on property and assets.
- Financial advisors— a financial advisor or tax specialist can help you navigate the complexities of inheritance tax planning and provide tailored advice.
- Online guides and articles— there are many websites and publications that offer guides and articles on inheritance tax planning, including step-by-step instructions and case studies.
- Seminars and workshops— some financial institutions and professional organisations offer seminars and workshops on inheritance tax planning.
- Books— there are many books available on inheritance tax planning, including guides written for both individuals and professionals.
Why Greenfields Financial Management?
Expertise
With years of experience behind us, our team is known as the experts in inheritance tax planning.
Approachable
Team
Inheritance tax planning may seem intimidating, but we aren’t! We’re here to help you make sense of it all.
Personalised
Approach
Your finances, assets, and personal circumstances are unique to you, so that’s how we tailor our approach.
Feel The Relief Inheritance Tax Planning Can Offer
After years of working and paying taxes, you want something to show for it that will continue on into the future. Whether your intention is to help your children, grandchildren, stepchildren, or any other relatives you’d like to leave a financial legacy to, our intention is to make that process as smooth as possible. Effective estate planning can help individuals and families reduce the amount of inheritance tax they are liable for, and ensure that their assets are passed on to their intended beneficiaries.
Work With Greenfields
Financial Management
It’s likely you’ve heard discussions about ‘giving your home to the children’ or ‘putting your assets in trust’, and considered acting on them. While these dinner party discussions are well-intended, they’re often not led by financial experts with years of experience and a wealth of resources available to them.
At Greenfields Financial Management, we offer exactly that. With help from our knowledgeable team, our financial advice aims to help you maximise your available allowances, draw on your assets in an order aligned with your goals, and help you make the most of your IHT-friendly investments. By incorporating your aims, we can assist you with your estate planning to ensure that as much of your wealth passes to your intended beneficiaries as possible. To get started, book a call with us today.