When does Inheritance Tax apply?
Contrary to popular belief inheritance tax is not only levied on death. It can be levied in a number of circumstances including:
On your estate on your death;
When you make a gift to a trust, including a gift of cash;
On a trust every ten years or where a distribution of capital is made;
On the recipient of a gift that you made during your lifetime (usually referred to as a potentially exempt transfer or “PET”) if you die within 7 years of making the gift.
Inheritance Tax has a lifetime rate of 20% and a death rate of 40%. Given that you have paid taxes whilst accumulating your wealth you’ll likely find a further charge on passing that wealth to the next generation an unwelcome thought.
When should I seek advice?
Mitigating your inheritance tax bill is not a short process to be undertaken in the final months of your life. Careful forward planning is certain to achieve the best results for you and your family and it may be possible to avoid inheritance tax entirely.
There are many circumstances where you should seek advice including but not limited to:
You have an estate worth over £325,000 (known as the “Nil Rate Band”), or are married and have an aggregate estate with your spouse or civil partner of £650,000;
Your spouse or civil partner is not domiciled in the UK;
You are a trustee;
You have agricultural property (including land and buildings) which you would like to pass on;
You have a business or company which you would like to pass on.
Of course, this list is not exhaustive and if you have any concerns whatsoever you should seek professional advice as early as possible.
What can Parkers Accountants and Chartered Tax Advisers do for me?
At Parkers Accountants we take the view that mitigating your potential inheritance tax charge is a consultative, collaborative and dynamic process not confined to a single meeting having appraised your affairs at that one point in time.
Often the circumstances of your potential beneficiaries can form as much a part of inheritance tax planning as your own with opportune examples being a child or grandchild setting their own business up or the provision of monies for the education of your grandchildren.
We understand that speaking about your mortality is not easy and often something people do not want to talk about. However, with the welfare of your beneficiaries at stake we would encourage you to discuss your affairs with us at the earliest opportunity.
You can be assured that you will be treated with respect and confidentiality whatever your intentions and we will work with you to ensure your intended beneficiaries receive their legacies as tax efficiently as possible. Please get in touch today to arrange a no obligation meeting.
Inheritance Tax Planning