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Inheritance Tax Planning

Inheritance Tax Planning

What is it?

Inheritance Tax is a tax on the Estate of someone who had died. Inheritance Tax planning is where we help you review your Inheritance Tax position and advise you on the expected Inheritance Tax liability on your eventual death, based on your current circumstances. We will advise on ways to minimise the potential liability and maximise the available reliefs and exemptions.

Who is it for?

Each individual is entitled to a nil rate band, currently £325,000. This means that on death, the first £325,000 of an individual’s estate will not be subject to IHT.

This nil rate band can also be used in lifetime, for example on the settling of funds into a trust.

For married couples, if, on the death of the first spouse, all the nil rate band is not used, then any unused nil rate band will be transferred to the surviving spouse.

An example of this would be if everything is left to the remaining spouse and so the spouse exemption is in point. The amount transferred is based on the percentage of the unused nil rate band and then on second death, that percentage is applied to the nil rate band at the time of the second death.

In addition, the Residence Nil Rate Band (RNRB) relates to relevant transfers of a main residence on death. It reduces the tax payable by an estate on death. It does not apply to reduce the tax payable on lifetime transfers that are chargeable as a result of death.

The RNRB is £175,000. It is also possible to claim a brought forward RNRB for the spouse who died first, so long as the second spouse has died after 6 April 2017.

The RNRB is available when a person downsizes or ceases to own a home and assets of equivalent values, up to the value of the RNRB, are passed on death to direct descendants.

If the value of the estate (after deducting liabilities, but before reliefs and exemptions) is above £2 million, the RNRB is tapered away £1 for every £2 that the net value exceeds that amount.

Both the nil rate band and RNRB have been frozen at the above levels until April 2028, so now might be the time to take action to check your overall position.

If your estate is above these thresholds, Inheritance Tax may be payable and it will be beneficial to take planning advice. If you have assets which are likely to increase in value, then inheritance tax planning may also be beneficial.

What’s at stake?

Effective Inheritance Tax Planning could help you/your estate avoid having to pay Inheritance Tax at 40% on death.

What should I do next?

Find out more by downloading our pdf which contains information on Inheritance Tax Stats and how we can help.

Or, if you would like our help with your inheritance tax planning, don't hesitate to get in touch with Liz Higgins, our Head of Private Client Tax.

This is for information purposes only. No action should be taken without seeking specific professional advice. Thank you.

Find out more about Liz Higgins

Liz Higgins

Liz Higgins

Liz is the Head of Private Client Tax at Critchleys LLP.