Leave a thoughtful Legacy

There are few more confusing - or unpopular - taxes than Inheritance Tax (IHT). If you’re unsure of the details, or you’d like more of your inheritance to go to your family and less to the taxman or on care fees, we can help.

Leaving loved ones to incur up to a 40% reduction due to tax on their inheritance is a hard ask. Yet despite many children and grandchildren being ill-equipped to grapple with IHT, more and more families are having to deal with it.

It’s a situation that is set to continue, with the Office of Budget Responsibility forecasting that IHT revenues will reach £8.4 billion by 2026/2027.

In better news for your family, there’s been a staged increase in the residence nil-rate band threshold, which is now set at £175,000 for those who qualify when passing their main residence to direct lineal dependents. This goes some way to reflect surges in property prices, as well as other asset values recovering, which together have dragged more households into the IHT net.

Nevertheless, it can come as a shock to discover that a large proportion of your wealth, which includes the family home, investments such as Individual Savings Accounts (ISAs), life assurance plans not in trust and even old family heirlooms, might have to be sold to meet tax bills when you die.

Get in the know

So what exactly could your family be liable for? We’ve already discussed the residence nil-rate band threshold of £175,000. Then you can factor in that the first £325,000 of your estate is likely to be exempt from IHT. This means that, subject to various conditions, if you’re married or in a civil partnership, you could have a tax free estate worth £1,000,000.

Yet the simple fact is that IHT could be considered a voluntary tax. The Treasury relies on our inertia and reluctance to confront the issues of death and inheritance. To make things worswe, the Treasury’s coffers are boosted at the exact time your loved ones least need the added hassle.

Help your family now

There are many perfectly legitimate ways to mitigate IHT through foresight and careful financial planning. You don’t need highpowered tax planning, just a willingness to discuss the issue, act and make use of the many options available. These include establishing trusts (they won’t be regulated by the Financial Conduct Authority) and making use of annual exemptions such as gifting.

Bear in mind that if you’re domiciled, or resident, in the UK, IHT rules are complex.

Certain transfers are deemed exempt from the tax if they pass between a husband and wife or civil partners.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

Trusts are not regulated by the Financial Conduct Authority.

Get in touch

If you’re after a little help to guide you through the IHT maze, give us a call. We’re here to make a difference to your family’s future.

To receive a complimentary guide covering wealth management, retirement planning or Inheritance Tax planning, contact Navigation Wealth Management on 01482 379504 or email navigationwm@sjpp.co.uk