Inheritance Tax and Estate Tax Planning

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Inheritance Tax and Estate Tax Planning

We advise on all aspects of UK taxation with emphasis on Inheritance Tax and Capital Gains Tax.

Our services include:

  1. Estate Planning
  2. Capital Gains Tax
  3. Creating Trusts including Personal Injury Trusts and Trusts for Disabled Beneficiaries

What are the current Inheritance Tax allowances?

  • Nil Rate Band – this is currently £325,000 per individual.
  • Residence Nil Rate Band (“RNRB”) – this is currently £175,000 per individual. The conditions for this allowance are:
  • Your estate does not exceed £2 million – for estates above this level the RNRB is tapered (i.e. slowly reduces) and where the estate is worth £2.35 million (or £2.7 million for spouses/civil partners where two RNRBs are claimed on the second death) the RNRB tapers away completely
  • You have a property which used to be/is your residence at the date of death – this can be a property outside the UK
  • The allowance is limited to the value of the property (is lower than the total RNRB available)
  • Your property is left on your death to your direct descendants i.e. your children and grandchildren
  • Downsizing relief is available where you have sold your home since 8th July 2015 which would have qualified under these rules, and you do not have a qualifying property at the date of death otherwise.

Both allowances are transferable between spouses/civil partners – if the allowance is not used fully on the first death the unused allowance can be transferred to claim on the second death. This claim is made following the second death.

How much can I gift away?

The allowances available for lifetime gifts are:

  • Annual allowance of £3,000 per tax year (if the previous tax year’s allowance has not been used this can be rolled forwards)
  • Small Gifts exemption of £250 per person each tax year
  • Gifts for wedding – £5,000 to a child, £2,500 to a grandchildren/great grandchild or £1,000 to any other person
  • Regular payments out of surplus income – where after accounting for your usual annual expenses you have surplus income.

Gifts above these allowances are subject to the 7-year rule. If you survive 7 years from the date of the gift the value is outside of your estate. If you do not survive the 7 years, the value is included in your estate for IHT purposes and the tax due depends on the value of the gift and when the gift was made. Depending on the asset gifted you may also need to consider the CGT consequences.

Get in touch with our Inheritance Tax and estate planning solicitors

Contact IBB’s experienced wills and trusts solicitors today to discuss your inheritence tax and estate planning issue. Call us on 01494 790002.

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