Many people still think that inheritance tax (IHT) is only of concern to the very wealthy. This is a mistake, the nil rate band (the amount of money that can be passed on to your beneficiaries before IHT applies) has been frozen since 2009. It is £325,000 which is a reasonable amount, but when you take into consideration the value of a property many people that consider themselves to be of modest means will fall into the category of having an IHT liability. Yes, the government introduced a residence nil rate band last year and many couples believe that this will allow them to pass assets of £1 million to their family. However, this may not be the case. Firstly the extra allowance was only £100,000 per person, rising to £175,000 by 2020. Secondly it depends on how you have written your Will as to whether some or all of this extra allowance will be applicable.
More importantly I think that those that do not mitigate potential inheritance tax are missing a trick.. IHT is one of the very few avoidable taxes so why pay hard earned money to HMRC when you could pass it to your family or other beneficiaries instead?
The earlier you find out what you can do the better. IHT planning doesn’t have to be about passing on assets when you’re dead either. Much more satisfying to be able to help your family whilst you are still around to see them benefit and enjoy it with them. These days planning is more about intergenerational provision. Why not set up pension plans for your grandchildren, a plan that will provide for their university fees or a deposit for first home? Have a pot of money that can benefit, your children, grandchildren, great grandchildren and on down the family line – now that’s a true legacy.
IHT planning is generally better done in a timely manner. However, if you do leave it late there are still opportunities that can move money outside your estate (so not liable to IHT) in just two years and it is still possible to do a little death bed planning!
Good independent financial planning for IHT mitigation does not cost the earth and can save hundreds and probably thousands of pounds which can be used for your family or favourite charity. The important thing is that you get to choose.