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IHT and Estate Planning

Having worked hard to accumulate their wealth and achieve their financial freedom, many high net worth individuals are naturally keen to put in place the right plans and tax-saving strategies to ensure they leave as much of their estate as possible to future generations.

Putting the right strategies in place

We have an enviable track record of advising and assisting individuals in the mitigation of their tax liabilities, helping them to preserve and pass as much of their wealth as possible to their heirs.

We can help you put in place plans and strategies to minimise the amount of IHT that would otherwise be payable. This can include investing in tax-efficient share schemes or business ventures, giving away assets in your lifetime, taking out life insurance policies, setting up trusts, making gifts from your surplus income, maximising the use of your annual tax-free allowances, or giving money to charity.

As we always take a holistic approach to our client’s finances, the plans we help them put in place for the benefit of future generations always take account of their own ongoing financial requirements, such as the potential need for reserves to pay for elderly care. This is where our Lifetime Wealth Model can be particularly helpful to clients in tracking their income flows and assessing their overall capital position.

Download our IHT guide

How IHT is calculated

Inheritance Tax is paid if a person’s estate (their property, money and possessions) is worth more than £325,000 when they die. Your estate will owe tax at 40% on anything above the £325,000 inheritance tax threshold (or 36% if you leave at least 10% of your net estate to a charity).

Married couples and civil partners are able to pass their possessions and assets to each other tax-free (if UK-domiciled) and the surviving partner is allowed to use both tax-free allowances (when not utilised at the first death), effectively doubling their combined nil-rate band to £650,000.

The Residential Nil Rate Band

From April 2017, the new family home allowance, the residence nil rate band (RNRB), will apply if you leave a main residence to a direct descendant like a child or grandchild, including adopted, step or fostered children.

The RNRB will increase from £125,000 in 2018-19, to £150,000 in 2019-20, before reaching £175,000 in 2020-21. As the RNRB can be added to the existing threshold of £325,000, this would potentially mean an overall allowance of £500,000 by 2020 for those who are single or divorced, or £1m for those who are married or in civil partnerships.

However, where a property is worth over £2m, the family home allowance (but not the individual allowance of £325,000) reduces by £1 for every £2 of value over £2m.

For further information on how we can help you build and protect your wealth, please contact us.

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