Inheritance Tax

- Nothing is certain but death and taxes -

It’s important, although perhaps somewhat unsettling, to be aware that when you die, your estate could be subject to inheritance tax (IHT) if it’s worth more than a certain limit (known as the inheritance tax threshold). With careful planning you can reduce the amount payable, but it can be complex which is where I come in.

Most of the clients at White Horse Financial Services are already retired, will have possibly be mortgage and debt-free (or almost) and tend to have an eye on what happens after their death, assuming that they haven’t spent everything.
IHT can therefore be something that is a very real concern, as few want to see a large proportion of their assets go to the State rather than to their loved ones.

The inheritance tax threshold is £325,000 per person, giving married couples and civil partners a joint estate of £650,000 before any IHT is payable. Under current legislation, this threshold will stay in force until April 2018, although an additional allowance (which covers only the family home) will gradually be phased in from April 2017, starting at £100,000 per person. In most cases tax is currently payable at 40% of everything over the IHT threshold. Here’s an example of how it might work:

Assets
Value
Main Home
£500,000
Holiday Property
£125,000
Investments
£350,000
Investments
£350,000
Bank Accounts & Savings
£100,000
Life Assurance
£250,000
Cars & Personal Posessions
£50,000
Total
£1,375,000
Now subtract
 
Balance on credit card
£5,000
Gifts in the Will to charities or political parties
£25,000
Two sets of Nil Rate Band allowances
£650,000
Leaves a taxable estate of
£695,000
Inheritance Tax due at 40%
£278,000
Leaving an Estate of
£1,097,000

And HMRC will expect to be paid their share of £278,000 before the go-ahead can be given for the other benficiaries can receive their inheritance.

There are various ways you can reduce the size of your taxable estate, such as with lifetime gifts, trusts, charitable giving and other forms of planning. It’s important to think a long way ahead, as some aspects of IHT planning need seven years to take full effect but I also have access to other methods that can take effect over a much shorter timescale. You can access more information on IHT in one of my Free Guides.

If this is an area you’d like my expert help with, then please get in touch.

White Horse Financial Services (FCA Reference: 491847) is a trading style of CP Bearfoot, a fiercely independent financial adviser and an Appointed Representative of Validpath Ltd (FCA Reference: 197107) which is authorised and regulated by the Financial Conduct Authority.