Inheritance Tax

Inheritance Tax SOLICITORS IN READING & HENLEY

Inheritance tax (IHT) is levied on a person’s estate when they die and on certain gifts made during an individual’s lifetime. There are opportunities for minimising the impact of inheritance tax, but it is important to obtain specific legal advice appropriate to your personal circumstances.

It may be possible to reduce or eliminate this tax liability with careful planning. You may therefore be able to:

Nil Rate Band

On a person’s death, inheritance tax of 40% is charged on the value of their estate over the inheritance tax threshold, known as the nil rate band (NRB), which currently stands at £325,000. A further residential nil rate band (RNRB) of £175,000 has been added as a ‘top up’ in respect of one residential property. Both this and the nil rate band will be frozen, (so the RNRB won’t be index-linked and we’ll have to see what happens in 2026 if inheritance tax still exists in its current form). However, as is often the case, there are restrictions which include:

This means that spouses and civil partners who own residential property, are now able to gift up to £1 million to their direct descendants with no inheritance tax payable on their estate. However, whilst the residence nil rate band is welcomed to reflect the increase in residential property prices, the mechanism by which it is offered is still unfortunately complex. Some couples may still need to consider lifetime gifts to reduce estates below the £2m threshold. Testators should also consider who the beneficiaries are in their Will – if their direct lineal descendants do not inherit, testators could be missing out on these important inheritance tax benefits.

Where a person died before 6 April 2017, their estate will not qualify for the relief. A surviving spouse may be entitled to an increase in the residence nil rate band if the spouse who died earlier has not used, or was not entitled to use, their full residence nil rate band. The calculations involved are potentially complex, but the increase will often result in a doubling of the residence nil rate band for the surviving spouse.

The residence nil rate band may also be available when a person downsizes or ceases to own a home on or after 8 July 2015 where assets of an equivalent value, up to the value of the residence nil rate band, are passed on death to direct descendants.

How we can help

Inheritance tax planning and the use of gifts, trusts and charitable donations should be tailored to your specific situation, taking into account your personal circumstances and aspirations. Other taxes need to be considered carefully but there can be scope for substantial savings which may be missed unless professional legal advice is sought.

If you have recently received or are likely to receive an inheritance in future, we can also advise on the best way to maximize this tax planning opportunity through the use of deeds of variation. Contact us to see how we can help and minimise any tax liabilities.

Solicitor- Wills, Trusts & Estates (Lower Earley, Reading)
Solicitor & Notary Public – Wills, Trusts & Estates (Henley-on-Thames)
There are opportunities for minimising the impact of inheritance tax, but it is important to obtain specific legal advice appropriate to your personal circumstances

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