Inheritance Tax & Citizenship
Avoiding inheritance tax that’s not payable is a duty to to your family. One of our obligations a citizens of a democratic society is to pay our taxes. I doubt you or I would want to live in a land in which folk didn’t pay their taxes. Nonetheless, I’m yet to see any sense anyone paying more than their fair share.
Seriously, are you sick at the thought of your family losing a chunk of your assets to pay inheritance tax?
I shall help ensure your family get as much of your assets as possible. I’ll help reduce and when possible eliminate your inheritance tax (IHT) liability.
Without professional advice and planning, HM Treasury could be the largest single beneficiary of your estate.
A well written will is the first step in ensuring your family avoid inheritance tax when they need not pay it. The structure of gifts and bequests in your will potentially affects the tax liability.
Inheritance Tax Nuts & Bolts
The nuts and bolts. Every individual has an inheritance tax allowance of £325,000. That means on death, one can give away £325,000 worth of assets without the liability to IHT. This allowance is also called the nil rate band. Everything above this limit is liable to be taxed at the rate of 40%. A simple example: a deceased person had a gross estate of £700,000, everything over the allowance (£375,000) would be subject to an IHT charge of £150,000.
If a married person or a party to a civil partnership dies, the spouse or partner of the deceased could inherit the unused portion of the deceased person’s allowance. Potentially, a married couple may make a gift of £650,000 before their estate became liable to inheritance tax. This is the transferable nil rate band. The unused portion of the nil rate band cannot be transferred between cohabiting couples.
The Residential Nil Rate Band
The residential nil rate band allows an individual to pass to half a million pounds worth of residential property to direct descendants. The allowance is transferable on the death of a married person or someone in a registered civil partnership to the survivor of the marriage or partnership.
Scope of the Tax
When I started as a financial adviser and inheritance planner some three decades ago, junior folk like me had no practical experience of this tax. It affect very few people, only the richest people in the land fell within its scope. Now it hammers people of relatively modest means. This evil levy ensnares police sergeants, deputy head teachers and staff nurses. People who’ve worked hard for all that’s in their name.
Inheritance tax is a misnomer. It is not a tax on inheritance but rather, a tax on gifts or transfers of capital. When inheritance tax was introduced in 1986, it replaced a ‘capital transfer tax’. Transfers of capital into trusts may attract an immediate levy of 20%. In most other cases, the proximity of the date of the transfer to the date of death of the donor is the point on which the liability to this levy turns. Thus, we have the concept of potentially exempt transfers and the 7 year rule.
Gifts to charities (and political parties) are exempt from inheritance tax. From this arises the ‘10% threshold’. This does your family no benefit.
You’ve possibly heard of ‘gifting’; ‘the 7 year rule’; ‘the 10% threshold’; the small gift exemption and several other wheezes and schemes. The Treasury thought things were too simple, so there are the ‘nil rate band’ and further, the ‘residential nil rate band’.
Question: how do they relate to you? How do you protect your business from inheritance tax?
Inheritance tax planning
I have never, and would not:
- recommend or advise methods, schemes or plans not explicitly approved by law
- attempt to fool, trick or steal from the tax authorities
I’m reminded of my mother’s injunction: to never do anything I wouldn’t be happy to recount in a court of law, otherwise one would be subject to scrutiny that would rattle Caesar’s wife. More on the emperor.
What you get
You and I would determine your potential liability to inheritance tax, use the ‘tax breaks’ to which you’re entitled and make the most of the allowances and reliefs. Did you know at last count, there were at least 109 different allowances and reliefs on inheritance tax? These often overlap and are often contradictory, some of dubious intellectual merit or social worth. It is sensible to render on to Caesar what is Caesar’s we would ensure you pay no inheritance tax. I’ll work within the rules, but we use the rules to your advantage.
Tell me whom you want to inherit your assets. We discuss what is important to you and devise a plan that would make you happy – a plan that would meet your objectives.
A clear, simple and straightforward plan. A plan so clear, an eight year old would understand it.
We start with:
- An open mind – forget what you might have heard down the pub, what you might have heard on the wireless
- A blank sheet of paper – no forms, no templates, no back of the magazine calculations
- The belief that you want your family, not HM Treasury to get the benefit of your life’s work
Certainty that your family would inherit your home, your business and other assets – and not have to get rid of a chunk of it to pay inheritance tax.
The first step in inheritance tax planning is either call 020 8669 1779 or fill the form below to arrange an appointment to explore your circumstances and the potential actions. The consultation is without cost or obligation.