Inheritance Tax (IHT) can be a considerable burden for those who inherit on the death of a loved one.
For example, let us assume that a couple own a home worth £650k and other wealth worth £350k and leave all their assets to each other on the first death. On the second death, the deceased’s estate would potentially face an IHT liability of £140k.
Unfortunately, IHT is now also subject to ‘fiscal drag’, a situation in which somebody suffers a greater tax burden without necessarily having increased their wealth or income in real terms.
It is caused by tax allowances, exemptions or reliefs not increasing in line with inflation. IHT best illustrates this with the freezing of the nil rate band at £325k until 2018/19.
So set against this background, what action can an individual or married couple take to restrict the impact of IHT?
Well, thankfully there are a whole range of planning strategies available, it is impossible to provide ‘general advice’. IHT planning is very much based on individual circumstances, objectives and needs.
That is why it is vital to involve a financial adviser and solicitor.
Given that asset ownership and values change (think of the change in the value of your own house) personal circumstances vary and tax rules are amended it is another segment of your overall financial plan which requires ongoing attention. We run a series of free to attend, informative seminars and have a ‘Focus on IHT’ in November which is now open for registration.
n SMCG Wealth is authorised and regulated by the Financial Conduct Authority. All statements concerning tax are based on our understanding of current tax law and is subject to change. Not all forms of tax planning are regulated by the Financial Conduct Authority.