Inheritance Tax Planning

The “most hated” tax of all. Estates worth £1 million or more contributed to record IHT receipts of £5.4 billion in 2018/19. Will yours?

Inheritance Tax (IHT) is regularly described as the most unjust and hated of all taxes. If you have already paid tax during your lifetime, why should any wealth you leave behind to be taxed again?

Unfortunately, this is the case for many people across the UK who have not sought appropriate and valuable inheritance tax advice.


What should you do?

We specialise in inheritance tax planning and through utilising our expertise, you may drastically reduce or even completely eliminate your inheritance tax burden.

What IHT is – and how it works

IHT is Inheritance Tax. If your estate exceeds a certain value when you die – currently £325,000 the “nill rate band” plus the additional allowance for your home, the “residence nil rate band” (currently £150,000).

Your estate is the total value of all your assets (property, investments, savings, etc.) less any liabilities (loans, credit cards, mortgage, etc.).
The excess could be subject to a tax charge of 40%.

It’s important to note your pension or drawdown plan are not included they usually sit outside your estate at death for IHT purposes.

Below are some examples:

Example 1 – Single person, no children

  • Total value of all assets: £1,250,000
  • Total liabilities: £30,000
  • Estate: £1,220,000
  • IHT nil-rate band: £325,000
  • Chargeable estate: £895,000 x IHT 40%
  • Tax payable £358,000

Example 2 – Widow/widower or surviving civil partner, no children

  • Total value of all assets £1,250,000
  • Total liabilities £30,000
  • Estate £1,220,000
  • Own IHT nil-rate band £325,000
  • Spouse/civil partner’s IHT nil-rate band £325,000
  • Chargeable estate £570,000 x IHT 40%
  • Tax payable £228,000

What is the residence nil-rate band?

In April 2017 the ‘residence nil-rate band’ became available. This is an additional allowance which applies to an individual’s interest in a residential property. It is currently £150,000 (2019/20). It will increase to £175,000 in the 2020/21 tax year.

This means that in 2020-21 a single person could have a total IHT-free allowance of £500,000 (£325,000 nil-rate band, plus £175,000 residence nil-rate band).

This could double to £1 million for married couples and civil partners.

If you are concerned about your inheritance tax burden, do not hesitate to contact us.