Tax Planning

Do you know how much you can give away each year without worrying about Inheritance Tax (IHT)?

Do you know what the maximum annual tax-efficient pension contribution is, or what the annual limit for ISAs or Enterprise Investment Scheme investments is?

Click here for a free leaflet with all the tax rates and limits for the current tax year.

Summary of IHT-saving possibilities

  • Tax-efficient Wills

Even though each person’s nil-rate band (NRB) (currently frozen at £325,000) can now be transferred to a spouse, there are still important IHT planning steps that can be considered in Wills:

  • maximum Business Property Relief (BPR) and Agricultural Property Relief (APR)
  • gifts to charity are free of IHT (and if more than 10% of the Estate is left to charity the rate of IHT falls from 40% to 36%)
  • avoid ‘grossing-up’ ‐ i.e. incurring extra IHT by leaving large gifts “tax-free” to chargeable beneficiaries
  • consider the use of a life-interest trust or residue and “pilot” trusts established in a lifetime for children or grandchildren
  • Use of statutory gift exemptions
  • £3,000 p.a. can be given away without needing to wait 7 years to fall out of account. Use of this exemption can enable a wealthy couple to remove £66,000 from their estates over 10 years, saving £26,400 in IHT
  • £250 p.a. you can give away £250 p.a. to any number of individuals
  • Marriage allowance you can give away £5,000 to a child upon marriage
  • “Normal expenditure out of income” you can give away as much as you like ‐ as long as it is out of income and not capital, and as long as you don’t reduce your standard of living. Clients can use this exemption to pay regular premiums or a life assurance policy written in trust so that the proceeds fall outside of Estate for IHT purposes.