Inheritance Tax

When you die, most people wish to leave as much as possible to their loved ones.  This is not always as simple as you might hope.

Inheritance Tax

Leaving as much as possible to your loved ones

When you die, most people wish to leave as much as possible to their loved ones.  This is not always as simple as you might hope.  Her Majesty’s Revenue and Customs (HMRC) will apply 40% tax to the value of your estate over and above the current threshold.  This currently stands at £325,000 per individual and £650,000 for a married couple.    No Inheritance tax is applicable if the estate is being passed to a spouse, as the law sees your property as one estate together, unless there is a will stating otherwise.

Legislation was recently introduced to provide for an additional main residence nil-rate band. This will be available if the deceased's interest in a residential property, which has been his or her residence, and is included in the estate, is left to one or more direct descendants on death.

The value of the main residence nil-rate band for an estate will be the lower of the net value of the interest in the residential property (after deducting any liabilities such a mortgage) or the maximum amount of the band.

The maximum amount will be will be phased in as follows;

Year

Maximum Main Residence Nil-Rate Band

2017-18

£100,000

2019-19

£125,000

2019-20

£150,000

2020-21

£175,000

Even if a spouse inherits the estate, this only delays the time when tax will be payable as he or she will also pass away one day.  It is worth arranging forward financial planning with a specialist tax adviser to decide whether it would be appropriate to gift part of your estate, perhaps to children or other relatives, during your lifetime, or consider the use of trusts to help with your inheritance planning.

How we can help

At ad+ financial we have a wealth of knowledge of the taxation system and would be more than happy to assist you in ensuring you leave as much as possible to the people you wish to receive your estate.

Firstly, we fully review your financial affairs to identify what the current liability is.  It is also of great importance that we discuss your capital and income needs moving forward as this can have a significant bearing on our advice.  Whilst it is important for most clients to minimise their potential inheritance tax liability, this must not get in the way of their ongoing way of life.  

We can help with advice around gifting and using your allowances each year. You can gift up to £3,000 each year and this is immediately exempt from Inheritance Tax. It can also be possible to make regular gifts out of your income which is immediately exempt but great care must be taken around these to ensure that you comply with the rules. We work together with a carefully selected panel of trusted professional connections, such as solicitors, who can help ensure your legal affairs (wills and trusts) are set in place correctly to meet your Estate’s requirements.