Inheritance Tax Planning

Adroit Financial Planning has an extensive amount of expertise in estate and inheritance tax planning.  If you need any advice or to speak with one of our team call us on 0330 995 6838 or request someone to call you back

• What is inheritance tax?
• What are the main points to remember about inheritance tax?
• How much inheritance tax might you have to pay?
• How can you reduce the amount of inheritance tax paid?
• How can Adroit Financial Planning help? 

What is inheritance tax?

Inheritance tax (also known as IHT) used to be something only wealthy people had to consider. However, in recent years, due to the rise of house prices, this is something which now affects many more of us.

When someone has died and they leave property, money and/or possessions, this is known as “the Estate”.  The Estate has a nil rate band, meaning if it’s below a certain value, no tax will be charged. However, if the Estate is worth over that threshold, inheritance tax may be payable. The current threshold for the tax year 2016-17 is £325,000.

What are the main points to remember about inheritance tax?

Inheritance tax can be complex as there are certain situations in which it wouldn’t be payable, certain times when it would be made on gifts and time limits which apply to make gifts, It’s therefore important if you’re making a Will and considering inheritance tax, that you seek professional advice.

However, here are a few points to remember when considering inheritance tax:

• If the Estate has been left to a spouse or civil partner, there is no inheritance tax due
• If the Estate has been left to a partner who was not a spouse or civil partner, inheritance tax may be due
• If you are UK domiciled, inheritance tax applies to your worldwide assets.
• Inheritance tax applies to the total value of your estate including any gifts made in the last seven years and life policies not written in trust
• Any mortgages or debt will be deducted together with the nil rate band (when applicable)
• Inheritance tax is charged at 40% of the net value of the Estate

How much inheritance tax might you have to pay?

Inheritance tax is charged at 40% and therefore every case is different as there are various calculations to be considered.

Here’s an example of a situation in which inheritance tax would be payable and details of how the amount of tax is calculated:

Stephanie, a single mother, had an Estate worth £600,000 and an outstanding mortgage of £30,000.

Two years before she died, she gave a gift of £50,000 to her only son, David.

Upon her death, David inherited the rest of her Estate and had to pay inheritance tax.

Estate Calculation Explained:

 Therefore, the amount of inheritance tax due in this instance is £118,000.

How can you reduce the amount of inheritance tax paid?

There are many ways in which you can lessen the impact of inheritance tax. However, this is an extremely complex area and it’s impossible to list all the different ways. 

If you’re thinking about giving away money or assets to your family or friends to reduce the impact of inheritance tax, it may not be that simple.  There are time restrictions on making gifts and gifts could also incur other taxes such as income tax or capital gains tax.

It’s very important that you keep a record of any gifts you made including who you gave it to, when you gave it to them, what you gave and how much it was worth.

As this area is so complex, we would advise that if you seek professional financial advice if you wish to reduce or avoid inheritance tax.

How can Adroit Financial Planning help?

It’s impossible to detail here the exact methods we could use to lessen the impact of inheritance tax on your family. However, what we can confirm is that we’ll fully assess your situation and advise you of all of the options available to you, of which there will be many.

Whilst we understand this area can be daunting, we can assure you that we’ll thoroughly investigate your financial situation, provide you with every available option and advise you on how to achieve the best possible outcome. 

Contact the Adroit Financial Experts

Should you require advice from one of our experts, please contact a member of our team on 0330 995 6838 or using the form below: