inheritance tax

Inheritance Tax is payable by individuals on the value of their Estate on death. It is also a tax on gifts during your lifetime. Currently, the threshold for Inheritance Tax is £312,000, i.e. if the value of your estate when you die is worth more than this, Tax at 40% would be due on any value above this which could be painful and financially problematic for your loved ones.

As house values continue to increase, more and more people are becoming liable to Inheritance Tax and this can cause problems for family members where, for instance, the only asset in the Estate is a family home, this can mean that the home actually needs to be sold in order for the family to pay the Inheritance Tax to the Inland Revenue.

There can also be lifetime Inheritance Tax due on any ‘Chargeable Transfers’ made in a person’s lifetime. This would usually relate to any transfers into Trusts, where the transfers (plus all chargeable transfers in the past seven years) exceed the IHT threshold. Generally, most gifts in your lifetime are exempt from this lifetime tax, however, if you die within seven years of making the gift, they become a Chargeable Transfer and Inheritance Tax can become due.

As with all capital taxes, the rules relating to the taxation of gifts and deemed gifts are complicated and there are numerous reliefs, exemptions and allowances available to reduce the impact of Inheritance Tax. In order to reduce the possibility of Inheritance Tax, individuals should review their wills and potential exposure to Inheritance Tax on a regular basis. Planning can assist in the mitigation of potential Inheritance Tax, the most effective planning being undertaken well in advance of the date of death.

Here at Stiles and Co, we can help you to consider how Inheritance Tax could affect you, or a loved one, and can undertake the completion of the complex calculations which could demonstrate the position to you, should the worst happen. We can then undertake planning for you, in order to ensure that all reliefs, exemptions and allowances are made available and can make suggestions regarding the structure of your estate, plus, where applicable, we can advise on the possible use of Trusts.

Where Inheritance Tax can be forecast to arise, instead of undertaking appropriate planning, you may instead wish to cover the settlement of such liabilities by taking out appropriate life cover policies to meet these anticipated liabilities. Feel free to contact Stiles and Co Financial Services Ltd for further information s.benning@stilesfinancial.co.uk