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Inheritance Tax Planning

Inheritance Tax is not just something the wealthy have to pay. Although property prices may not have increased so much recently, historic rises have pushed a significant number of people into the position where there is a possibility that inheritance tax could be an issue.

inheritance taxIf you are single your estate could face the prospect of paying tax at 40% on any assets over the value of £325,000, The £325,000 figure is known as the "nil rate band" and if you are married or in a registered civil partnership the threshold would be twice this amount ie £650,000.

If you total up all of your assets and the figure either exceeds the thresholds now or, more importantly, may exceed them in the future (it is interesting to note that the nil rate band has been frozen at £325,000 until the tax year 2014/15) then there is the possibility that inheritance tax, currently 40%, may have to be paid on any excess over the thresholds.

You may take the view that it's not your problem as you will not be there to worry about it! Or, you may take the view that paying a further 40% tax on assets that, in all likeliehood have been built up from income that has suffered tax already, is a bit rich!

If you fall into the latter group, the good news is,that with appropriate planning much can be done to reduce the amount to be paid and, moreover, you can take control to ensure that your estate is distributed as you wish.

Use your allowances

The strategy you might want to employ in approaching your IHT planning would typically involve making sure you use any allowances or exemptions available. For example you have an individual annual exemption of £3,000. This increases to £6,000 if you haven't used the exemption from the previous year. Also, providing you can maintain your normal standard of living from net income you can make gifts out of normal expenditure.

Make a  will

It is also important to ensure that you have a will, it's up to date and set up in such a way that your affairs are tax efficient on death. You might also, if practical, consider making gifts during your lifetime to reduce your estate making sure, in doing so, that appropriate trusts are put in place so that you can retain control and maintain access to your capital. Finally, you might want to consider putting appropriate life assurance in place to pay any remaining tax or create a legacy.


There are many sophisticated Trust arrangements that can be put in place to ensure that you retain the income from your investments, but give away the capital to your selected beneficiaries. These all require specialist advice and should not be entered into without due consideration.

It is medium-sized estates which pay the most inheritance tax. £2.7 billion was received by HMRC for tax year 2010-2011, the vast majority of which was probably avoidable with decent planning.

If you would like to speak to an LGBT-friendly financial adviser about inheritance tax planning or any other financial matter, please enter your postcode under the box on your right to find an adviser near you.


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