Inheritance tax planning advice can help you make the right choices in advance.
Having paid income tax and National Insurance Contributions when you earn income, then paid tax on your savings and investments, and then paid tax on your pension income not to mention VAT when you buy goods and services, the last thing you want to face is the possibility of 40% of whatever you leave behind going to the Government in the form of more tax.
Inheritance Tax has become a familiar problem over the past decade or so, as rising property prices have brought the worldly assets of many people into the bracket where inheritance tax would be payable. Getting a little financial advice could help you avoid leaving debts of thousands of pounds to your children and grandchilden.
So the basics, Inheritance Tax is payable on assets that you pass to beneficiaries that exceed the ‘nil rate band’, which is the amount of money that can pass with no tax payable. Every individual has the right to use their own nil rate band. At the time of writing in 2012/13 the nil rate band is £325,000. Assets can pass between spouses free of any inheritance tax concerns.
If one partner in a married couple passes away without using their nil rate band this can be used by the surviving partner, effectively giving them a £650,000 nil rate band on their death.
If you have assets worth more than this though, and remember this includes literally everything you own, then 40% tax will be payable on the amount over the available nil rate band. This can cause problems sometimes because it’s not like HMRC will give you as long as you like to pay the tax.
For example, if you inherit a house worth £750,000 (and nothing else for the sake of this example and no other added complications) then an inheritance tax liability will be due. In order to pay that liability you either need to find the money from somewhere or sell the house. That puts a lot of pressure on beneficiaries at what is naturally going to be a difficult time anyway.
No one likes paying taxes but inheritance tax is particularly penal. Making some plans in advance to ensure your wealth management plans are effective can help an awful lot. However this does really depend on the type of assets you own.
The choices you make in relation to your inheritance tax planning of course have to fit in with your own financial needs are are not all about giving away all of your money as soon as you can. We have a range of services that can help you plan against this tax.
Whether gifting, investing, creating trusts or simple life assurance is the best option for you will be based on your own particular situation.