Our Comprehensive Guide to Inheritance Tax Planning

Inheritance tax planning is something many people delay thinking about. Even those with a sizeable portfolio tend to neglect this area of their wealth management. However it is important to appreciate: the implications this can have for your estate, the impact inheritance tax can have on your loved ones, and the options available to reduce it.

This detailed article will assist you in making the most astute choices.

Our comprehensive guide to inheritance tax planning

1. Which assets fall under inheritance tax?

The assets that are taxable under inheritance regulations include cash savings and lump sums, your investment portfolio, your property portfolio including any business property, any businesses you own, any vehicles you own, and any life insurance payouts. As you can see, the net is cast rather wide.

2. What percentage of tax is payable?

On any amount over £325,000 inheritance tax is a hefty percentage, coming in at 40%. This reduces to 36% if you donate a minimum of 10% of your assets to charitable causes.

It is important to appreciate the implications inheritance tax can have for your estate, the impact it can have on your loved ones, and the options available to reduce it.

3. Property inheritance tax: the new rules

From April 2017 a scheme is to be phased in whereby inheritance tax will no longer be payable on property worth up to £1m, or £500,000 for single people, if has been used as your main residence and is passed on to a direct descendent, namely a child, step-child or grandchild. The tax-free threshold will begin at £100,000 and rise by £25,000 each year until 2020.

4. Tax exemptions

Many baby boomers – people who are now over the age of 50 – will have an estate worth more than the nil-rate inheritance tax threshold of £325,000. However it’s worth checking to see if your occupation falls under inheritance tax exemption classification in the event that you die in active service.

Eligible high-risk categories include emergency services personnel and humanitarian aid workers. Of further note, this exemption applies in the event of an injury sustained through active service that contributes to or hastens later cause of death.

5. Inheritance tax planning for married couples

For married couples and civil partners, the tax-free threshold doubles to £650,000. When a spouse dies, any unused portion of their tax-free allowance is passed on to the surviving partner. An example of this would be if your assets are worth £500,000 and your spouse’s assets are worth £500,000. You would pay nothing on the first £325,000 of their assets, which you inherit, and 40% on the remaining, whilst still retaining a tax-free allowance on the first £325,00 of your own assets.

6. Reducing inheritance tax through gifting assets

Anything you give away as a gift seven or more years before you die is not subject to inheritance tax. However, you must give the gift freely and with no return benefit to yourself. The most commonly considered example of this is giving your property to your children before you die. In this case, tax exemption only applies if you no longer live in the property after you pass it on.

Anything you give away as a gift seven or more years before you die is not subject to inheritance tax.

Other ways to reduce your inheritance tax bill include giving away up to £3,000 per annum to a benefactor of your choice, giving an asset as a wedding gift, and giving money to charity. Should you die within seven years of gifting your assets, the good news is there is a sliding scale on tax payable for each year before death within the seven-year timeframe.

7. The importance of drawing up a will

Making a will is essential for the effective management of your estate in a manner that can be carried out in accordance with your express wishes. Without a will, tax complications can and do occur, which is the last thing anyone wants to leave behind for their loved ones.

Preparing for later on in life? Get our expert opinion on pension planning and investments.

8. For more detailed advice, download our free Inheritance Tax Planning Guide

We have put together a guide containing detailed advice and our expert opinion on the best ways of managing your inheritance tax planning. We are an experienced team, capable of guiding you through the more in-depth areas of inheritance tax planning, such as placing your assets in trust.

You can download the guide instantly and for free by clicking the button below.

Start reducing your inheritance tax – find out more

Don’t forget your hard work and careful financial planning should benefit you and your spouse in your lifetime. Obtain expert advice to help you make the most of your assets and enjoy the fruits of your labour.

Expert Wealth Management provides independent financial advice tailored to the individual needs and circumstances of every client. Receive personalised inheritance tax advice to suit your exact requirements. This will enable you to plan realistically for your big dreams and the practical needs of the future.


About the Author

Jon is a highly qualified and experienced Chartered Financial Planner and Certified Financial Planner with over 27 years’ experience. He loves working with clients who are passionate about getting the most out of life and feels his job is to support them living life to the fullest. Read more from Jonathan...
This article is distributed for educational purposes and should not be considered investment advice or an offer of any product for sale. This article contains the opinions of the author but not necessarily the Firm and does not represent a recommendation of any particular security, strategy or investment product. Information contained herein has been obtained from sources believed to be reliable, but is not guaranteed. Past performance is not indicative of future results and no representation is made that the stated results will be replicated.
I just wanted to say thank you very much for taking time to talk me through the pensions maze! You have been extremely helpful in helping me to make a decision. Tracey Smith

Expert Opinion…

Markets fell in 2018 – but keep this in perspective…

Jonathan, February 4th, 2019

December 2018 dished up a rather distasteful present for the holiday period. Many lines were written in the broadsheets about the global equity market falls, but were they really anything out of the ordinary? The challenge for investors today is that they have been spoiled by the run of strong returns since the Credit Crisis, with only one down year since 2008 until, that is, 2018.

Read More
Quarterly Investment Report January 2019

Dominic, January 25th, 2019

As I write this briefing, it has just been announced that legendary fund manager, and founder of Vanguard Group, John (Jack) Bogle has passed away. I appreciate than many of you will not have heard of him; but it is estimated that thanks to Jack Bogle, investors have saved $175 billion in […]

Read More
A quick review of investment returns in 2018

Abraham Okusanya, January 16th, 2019

Given the the media furore surrounding the investment markets in final quarters of 2018, we feel it important to review the performance of major asset classes to provide some long-term perspective that we hope every investor will find useful and even comforting.

Read More
T: 01993 772467      F: 01993 775067      E: advice@expertwealth.co.uk

Expert Wealth Management, West Wing, The Old Dairy, High Cogges Farm, Witney, Oxfordshire, OX29 6UN

Your Protection: In the unlikely event of your ever having a complaint which we have not been able to resolve amicably, you have recourse to the Financial Ombudsman Service (FOS). This is an independent body which will investigate complaints at no cost to you.  The FOS website is www.financial-ombudsman.org.uk.