Inheritance Tax Advice
More and more people are finding themselves with an Inheritance Tax liability, and whilst scope does exist for some mitigation it is wise to seek the expert knowledge of a specialist before embarking on a mitigation project.
An important fact to note that once a person becomes poorly and/or loses mental capacity it may become a little bit more complicated and sensitive.
Inheritance Tax is divided into two parts really, firstly, the nil rate band refers to an amount up to a pre set limit (a threshold), and this means that no tax is due if the value of a persons estate is less than the threshold.
However, if the estate value is over the threshold, tax becomes payable, and anything over the limit is taxed at 40% (regardless of persons nominal rate during their lifetime).
In the last budget the chancellor confirmed changes to the threshold levels for individuals the next three years as follows:
| From April 2008 | £312,000 |
| From April 2009 | £325,000 |
| From April 2010 | £350,000 |
Recent changes mean that couples (married and civil partnerships) can pass their nil rate band (in full or the unused portion) onto the surviving partner.
Our experience has shown that immediate or future care fees planning can be an effective way to help reduce or mitigate this tax altogether.
There are other ways of mitigating or reducing this tax, there are various ways of doing this, the most common is that of "Gifting".
There are different classes of perfectly legal gifts; lifetime gifts and automatically exempt gifts, the latter has a fairly strict code, and can be utilised as follows:
You can make small gifts to people of £250 for each person.
Any one can make an annual gift(s) of up to £3,000.
There are various gifts you can make in consideration of marriage:
- As a parent you can make a gift of £5,000.
- As a relative you can make a gift of £2,500.
- As a friend you can make a gift of £1,000.
The gifting of funds for other reasons are generally referred to as lifetime gifts, and most lifetime gifts can be exempt from Inheritance Tax, but for this exemption to happen the donor must survive for over seven years.
Should the donor not survive for a full seven years the following taper relief will apply.
| Years before Death | Amount of IHT Applied |
| 0 - 3 | 100% |
| 3 - 4 | 80% |
| 4 - 5 | 60% |
| 5 - 6 | 40% |
| 6 - 7 | 20% |
| 7 + | none |