“..voluntary tax, paid by those who distrust their heirs more than they dislike the Inland Revenue”. Roy Jenkins, Chancellor of the Exchequer, 1986

If you are deemed to be domiciled in the UK, on your death Inheritance Tax (IHT) is a tax paid to the Government on all of your worldwide assets.  The value of assets above the nil rate band are likely to be taxed at 40%. Soaring house prices in recent years has meant that it is no longer just wealth people who face Inheritance Tax bills.

Is IHT my problem?

Although IHT won’t affect you personally, it could be an extra burden for your loved ones when they are grieving. And do you really want to see up to 40% of the wealth you have worked hard to create in your life going to the government after your death?

The executors (or legal personal representatives) of your estate are responsible for arranging payment of the IHT. If you’ve chosen members of your family for this task this could mean even greater stress for them at a difficult time.

Can I do anything to help reduce IHT?

Absolutely! There are many solutions available so that it can indeed be considered a “voluntary tax”.

You may be surprised to learn that you can write your Will in a way that could reduce tax (and perhaps save on care home fees too). By using certain trusts that only come into force on death you could protect your estate from having to pay an IHT bill. Speak to us about tax efficient wills.

Trusts are a way of getting assets out of your estate but still having some control over what happens to them if you are a trustee. The two main benefits of putting money into Trust are that these assets may not be included in any IHT calculations and the money trust can go straight to the beneficiaries after your death as they won’t be held up by Probate (or Confirmation). This is a complex area requiring specialised advice.

A Discounted Gift Plan is designed for customers who want to gift money to a trust as part of their IHT planning strategy, while retaining a right to regular “income” payments from that trust. The discounted gift trust may be suitable if you have surplus capital that you are certain you will never require in the future, but from which you need to obtain regular withdrawals, and are under age 90 and in good health.

A range of investments have been introduced to take advantage of the Business Property Relief (BPR) available on certain company shares which gain a full exemption from inheritance tax after the shares have been held for 2 years. Business Property Relief has been around since 1976.

It is really important to create the right balance between saving tax and maintaining access to the assets you need, so this highly specialised area of planning should not be entered into without financial advice.