An early casualty of the new coalition government is the Conservatives’ planned increase in the inheritance tax nil-rate band to £1 million. Instead, the current exemption of £325,000 will remain in place for the lifetime of the current parliament.
Where the value of an estate exceeds the nil-rate band, the excess is chargeable to inheritance tax (‘IHT’) at 40%. As house prices are starting to rise more families are being caught in the IHT net.
There are many options available to mitigate one’s IHT liability. The first step is to make a will to ensure that your estate does not face an unnecessarily large IHT bill. There are also reliefs which can be used in one’s lifetime. If a gift is made and the donor outlives it by 7 years (and does not take any benefit from it) the value of the gift is outside of their estate for IHT.
The 7 year rule does not apply in all circumstances. For example, up to £3,000 can be given away in any one tax year and the donor need not survive by 7 years for it to be IHT free. Further, excess income can be given away and is immediately exempt from IHT if it can be shown that the money gifted did not materially affect the donor’s standard of living. It is imperative that the donor does not derive any benefit from such gifts for them to be effective for IHT.
As with any advice of this nature, professional guidance should always be obtained. For more information please contact Geoff Dennis of Brightstone Law LLP on 020 8731 3080 or email: gd@brightstonelaw.co.uk.
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An inheritance taxis an assessment made on the portion of an estate. This article giving lot of information for taxes.
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