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Inheritance Tax planning
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Inheritance Tax (IHT)
The value of estates above the threshold of £650,000 for couples in the tax year 2011/12 is taxed at 40%. People who have been widowed will also benefit by being able to use any unused portion of their deceased partner's allowance when they die. So if all the estate was left to a surviving spouse, for which there is no IHT payable, that surviving partner will have the whole £650,000 allowance. For single people, the allowance is £325,000. The rate of IHT will drop from to 36% from April 2012 for estates leaving 10% or more to charity.
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Until 2008-2009, the Inheritance Tax threshold was not increased over the years in line with house price inflation so the estates of home owners continue to suffer increased Inheritance Tax, although the latest increases will go some way to alleviating that problem. The £650,000/£325,000 threshold was fixed in the April 2010 budget until at least 2014/15. The annual gift exemption, £3,000, has not been increased for many years so the ability to give assets away continues to reduce in real terms. After all the taxation in your lifetime, on both income and capital gains, the Inland Revenue demands the final say with Inheritance tax. But does it have to? The "Death Tax" has often been described as the "voluntary tax". If you give enough away during your lifetime, and you survive long enough to avoid any tax claw-back, then you could still have the last laugh - leaving no more than an amount equal to the "Nil Rate Band" where no tax applies. How in practice can you do this and still leave yourself, and equally your spouse, enough to live on for the rest of your lives? And what are you to do about your house - possibly your largest single asset? Inheritance Tax has many exemptions and reliefs and a useful starting point is to consider them. However, taking advantage of them in practice can be quite complex. For a gentle introduction to the subject, go to www.direct.gov.uk, click on 'Money, Tax and Benefits' and follow the links to Inheritance Tax. A bespoke solution to inheritance tax is necessary as it will depend on the circumstances of each case. For example, what do your assets consist of and to what extent do you need them to generate income? Crucially, particularly for married couples, what flexibility is needed in terms of future access to capital or income, perhaps after the demise of the first to die? A range of inheritance tax solutions is available which, individually or in combination, can meet most people's objectives and circumstances, and achieve a great deal. However, individual advice is essential.
Where to Begin? Getting Support and GuidanceWhile many of these potential solutions are straightforward to implement, it’s strongly recommended you seek professional advice to ensure your individual circumstances are taken into account. Laterlife has teamed up with Skipton Financial Services (SFS), who are a 'Whole of Market' financial advisor, to offer an Inheritance Tax Service.For more details visit: |
 
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LINKS TO OTHER LATERLIFE FINANCIAL SERVICES PAGES Retirement Planning - General guidance, Retirement Pension Planning, Inheritance Tax Planning - General guidance, Equity Release, Long Term Care, Making a Will, Annuities, Finding a Financial Adviser Take a look at our overall section on retirement planning too. |
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