The Budget has not eased Inheritance Tax

The Inheritance Tax threshold is currently at £325,000 for an individual or, potentially, £650,00 for a married couple/civil partners. The value of a net estate above this threshold is taxed at 40 %. There are also tax concessions relevant to a main residence, that passes to direct descendants, that can, potentially, provide a further £350,000 for a married couple/civil partners before the 40 % rate applies.

The threshold amount has been frozen in the recent Budget until April 2031. More estates will likely be affected Inheritance Tax therefore as property prices continue to increase.

There are steps you can take as part of a tax planning review to plan to reduce the impact of Inheritance Tax.

Gifts can be made prior to death, either outright or into a Trust, with the aim of reducing your estate for tax purposes. If there is a business in your estate, a Will can be prepared to leave the business into a Trust and the non-business assets to a surviving spouse or civil partner to potentially remove Inheritance Tax, at least when the first spouse passes away.

In addition, there are financial products that may assist when planning to mitigate Inheritance Tax. Term assurance policies can be activated to cover tax payable following a gift made within seven years prior to death or, more generally, to cover the tax liability on an estate. There are other investment products that use Business Property Relief, to reduce the value of an investment to nil, that can be acquired and owned for two years prior to death. These types of investments can be especially helpful to ‘convert’ assets liable to Inheritance Tax, such as bank account values, into exempt assets through a purchase of a business property investment. Careful independent financial advice should always be considered before purchasing an insurance policy, or a business property investment, to reduce Inheritance Tax on an estate. Our estate planning services are often provided alongside the advice of an appropriate independent financial adviser.

Please call to speak with a member of our Private Client Team on 01606 74301 to discuss your tax planning requirements.