INHERITANCE TAX

Will my estate be liable for Inheritance Tax?

For deaths after 5^th April 2008 Inheritance Tax (IHT) is payable where the value of an estate is over £325,000* (‘the nil rate band’). Tax is payable on the excess above the nil rate band at 40%.

There are a number of exemptions available to you during your lifetime which can be used to reduce the IHT payable on your estate. In addition, further exemptions may be available following your death and your Will should be professionally drafted to make best use of these exemptions.

* 2011/12 rates

What are the Inheritance Tax benefits for married couples and civil partners?

Inheritance Tax is not charged on assets given to your spouse or civil partner (‘the spouse exemption’). This used to mean that people who left their entire estate to their spouse or civil partner lost all or part of their nil rate band allowance. Since October 2007 however, the rules for married couples and civil partners have changed.

Following the changes the first spouse’s allowance can now be transferred to the estate of the surviving spouse resulting in a double nil rate band (currently a total of £650,000*)

If you prepared your Wills before the new rules came in, you may wish to review your situation to make sure that your estate is gaining the maximum benefit.  We can help you clarify your situation and provide any other advice which you might need.

* 2011/12 rates

What about business and agricultural property reliefs?

There are two principal reliefs from IHT, namely Business Property Relief and Agricultural Property Relief. Both of these reliefs, subject to certain ownership conditions, can offer up to 100% relief from Inheritance Tax in relation to your business or agricultural property

These reliefs offer great scope for tax-planning and we can advise you how to take full advantage.

I have received an inheritance which increases my potential tax liability. Is there anything I can do?

If you have received an inheritance from someone’s estate you may be concerned that the value of your inheritance will increase the potential IHT liability on your own estate. This can be avoided by transferring some or all of your inheritance to someone else or even by retaining use of it yourself via a trust by way of a Deed of Variation. Any benefit redirected under the Deed is treated for IHT purposes as having been redirected by the deceased, and therefore never becomes part of your taxable estate.

A Deed of Variation must be made within two years of the date of death so advice should be taken as quickly as possible if you think this might apply to you.

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