Inheritance tax in the UK and how NOT to pay it….
Unless you are likely to pay IHT on your estate, or inherit money from someone whose estate does top the IHT nil rate band of £325,000 you may find this site a bit dull! Most of middle Britain need at least to be careful to avoid inheritance tax with rising house prices, insurance and pension payout and some savings it is all too easy to top £325,000. And then the Taxman may insist on adding back in gifts you made donkeys years before…
But what did the eminent Judge Lord Clyde say about IHT & other tax planning?
“No man in the country is under the smallest obligation, moral or other, so to arrange his legal relations to his business or property as to enable the Inland Revenue to put the largest possible shovel in his stores. The Inland Revenue is not slow, and quite rightly, to take every advantage which is open to it under the Taxing Statutes for the purposes of depleting the taxpayer’s pocket. And the taxpayer is in like manner entitled to be astute to prevent, so far as he honestly can, the depletion of his means by the Inland Revenue”
Lord Clyde Ayrshire Pullman Motor Services v Inland Revenue 1929.
UK Inheritance Tax can be cut easily with our help…..
But IHT is payable at a rate of 40% above the tax free allowance, so it is a pretty high rate of tax to lose, especially as IHT is one tax which can be cut dramatically – if not entirely avoided – without sailing close to the wind as some have done!
Who do you want to inherit?
Your choice is simple – do nothing and there is a good chance the Chancellor will inherit more of the assets you have worked hard for for so many years than your children or grandchildren. Is that what you want?
If you are still reading, we’ll assume that you would prefer to entrust your family or other beneficiaries with your accumulated assets rather than the Chancellor.
Quick Tips on saving UK Inheritance Tax.
- Contact us (!)
- Do it yourself and leave others to sort out the bits you didn’t fully understand.
- Each person can give up to £3,000 to one person every tax year (but transfers must be completed before the 5th April and in the recipients bank account!) You can split the £3,000 between different people.
- They can also give an unlimited number of gifts up to £250 – all to different people and none to the people who benefited in point 2.
- Larger gifts up to £325,000 drop out of the tax net after 7 years (sometimes 14) but that is not something to do without advice. Apart from anything else, lots of people give such gifts and still get some use from them – so the gift fails as far as UK IHT is concerned.
- Unmarried couples need special Wills – married / civil registered couples will normally be able to benefit from a joint tax free allowance of £650,000 – as long as the first to die leaves everything to the survivor.
- Structure your Will to leave any assets which are not subject to IHT to non-exempt beneficiaries – with good planning (which is where we come in) you can get the proverbial “double whammy” of IHT relief!
- Life policies and death in service benefits need to go into flexible trusts so they don’t swell the IHT bill for the survivor needlessly. With careful planning, both the survivor and the beneficiaries will benefit, and the Chancellor won’t.
IHT UK in the Budget 2013