Inheritance Tax Planning
Norman Jenkins (former member of parliament) once said that Inheritance Tax (IHT) or Estate Tax as it’s known in the UK is a ‘vulnerary tax’ which is only paid if you take no action.
Inheritance tax is paid by the beneficiary of the assets of someone who has died and Estate Tax is the tax based upon on.
Why should I get expert advice?
What is Inheritance Tax?
A brief history
In 1945 the Prime Minister Clement Attlee set the level of Estate Duty (as it was known then) in line with average house prices which a that time were circa £5,000. By the mid 1960s average house prices were circa £10,000 and by the mid 1980s circa £80,000 and now an average of £230,000. In the mid 1970s the terminology was changed to Inheritance Tax under the Labour Party and by and large the allowances have increased in line with house prices.
However, this does not take account of the exponential value of house prices in London and the South East where the average is much higher at £850,000. For that reason, the Government under David Cameron introduced the Residence Nil Rate Band (RNRB) allowance to take account of the disproportionate house values. What we observe is that along with higher value properties goes higher levels of others assets such as savings, investments, second homes and investment property; all of which are calculated at 40% over the standard Nil Rate Band and the additional Residence Nil Rate Band allowances of £1,000,000.
So if your assets, including your principal private residence (PPR) and other property and savings, come to more that £1,000,000 your estate will be charged 40% over the excess which can and does run into hundreds of thousands of pounds.
How Your Legacy Solutions
At Your Legacy Solutions we have developed close working relationships with our trusted tax partners to ensure we take account of any tax liabilities.
This has become a complex area and a carefully executed Legacy Plan can be an effective way of mitigating tax for the next generation.