Simple and regular Inheritance Tax Planning

11th April 2018 | Posted in: Allowances, Pensions, Savings & Investments, Personal Tax, Planning, Property Investment

Inheritance Tax (IHT) is a charge on the value of your estate when you die. There are a number of exemptions available to help reduce your estate’s potential Inheritance Tax charge.

Described below are some of the simpler and smaller Inheritance Tax planning steps which you can take advantage of on a semi-regular basis to help reduce your taxable estate, and pass wealth down generations.

Annual Exemption

You can give away up to £3,000 worth of assets each tax year and they are removed from your estate instantly.

You can carry any unused exemption forward to the next year but only for one year.

Therefore, if you have not made a gift in the previous tax year, you could give away up to £6,000 in the current tax year.

It would be quite prudent to gift a total of £3,000 each tax year to make use of this allowance. Gifting regular smaller amounts also offers greater financial control to the donor, as opposed to a one-off larger amount.

Normal Expenditure out of Income

In addition to the £3,000 Annual Exemption, a gift out of annual income which is habitual or typical (i.e. a gift which happens year after year) will instantly be removed from the donor’s estate providing the donor is left with sufficient income to maintain their normal standard of living.

For example, if an individual made a monthly pension contribution on behalf of someone else, or if grandparent paid the annual school fees for a grandchild.

This relief would not necessarily reduce the value of the estate but would certainly help to stop the estate from growing in value, and therefore help to reduce the potential tax charge.

It is important to note that there is no monetary limit on this exemption, because it is unique to each individual.

Please contact us if you would like to review your own Inheritance Tax position or would like advice regarding other Inheritance Tax planning.

If you feel we could help you and would like to discuss any of the above, please contact James Edwards on 0131 317 7377 or email to
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