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Inheritance Tax Planning

Most people are now aware that Inheritance Tax is a significant problem for ordinary people and no longer confined to the wealthy. In fact, the majority of Inheritance Tax is actually paid by ordinary people who didn’t realise that there was a problem until it was too late and actually the super-wealthy pay very little because they know they have a problem and can afford the best advice.

So what’s the problem?

Putting it simply, if you die leaving assets such as cash or property with a value greater than the threshold for Inheritance Tax (the Nil Rate Band), the taxman will take 40% of this excess wealth. Even the new Residential Nil Rate Band is complex and won’t help you if your estate is worth over £2.2 million.

4 simple steps to reduce Inheritance Tax?

“…a voluntary tax, paid by those who distrust their heirs more than they dislike the Inland Revenue”

This is what Roy Jenkins, Chancellor of the Exchequer, said in 1986. It is just as true now as it was then – there are many solutions available and with some thought and planning it is possible to reduce or even remove it altogether, without losing control of your money and assets.

1. Make a Will now!

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 a trust that only comes into force on death you could protect your estate from the taxman and Social Services. Speak to a good solicitor for advice.

2. Consider setting up a family Trust

Trusts are a way of getting assets out of your estate but allowing you to retain some control over those assets. The two main benefits of putting money into Trust are that these assets may be excluded from your taxable estate, and the money in trust can go straight to the beneficiaries after your death and won’t be held up by Probate (or Confirmation). This is a complex area requiring specialised advice and a good solicitor can help with this too.

3. Use your allowances

Consider giving away surplus income or capital. There is a range of allowances that you can use such as the annual gift allowance of £3,000 or gifts out of surplus income, that won’t count against your Nil Rate Band.

But be careful because if you give away more than your available Nil Rate Band you may have to pay some tax now. And in some cases the order that you make gifts can be important too, so you need advice.

4. Speak to a Financial Adviser

A good Independent Financial Adviser (IFA) can recommend solutions to help you reduce or even eliminate IHT altogether.

Innovative Solutions

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 are under age 90, in good health and have surplus capital that you are certain you will never require in the future, but from which you need to obtain regular withdrawals.

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 in existence since 1976.

Some companies have developed solutions that provide flexibility in providing income from a gift that reduces your taxable estate. Canada Life is one provider that offers such a solution, so have a look at their short video:


Finally, if you can’t afford to lose access to your money or assets you can gift the payment from a life insurance to your beneficiaries. This can often be a competitive way to make sure that tax gets paid without having to set aside cash.

How we can help

For many people the right solution is often a combination of approaches. By carefully structuring the planning we can help you to achieve the right balance between keeping accessible money and reducing tax.

Contact us to find out how you could reduce the burden of Inheritance Tax before it’s too late.


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