No Changes to Inheritance Tax!

As expected, the Chancellor Jeremy Hunt has not made any changes to Inheritance Tax, despite dangling that particular carrot once again! Head of Wills & Probate, Jo Robinson discusses in her most recent blog…

Instead of any changes relating to Inheritance Tax , there are cuts to National Insurance, and increase in State Pension, changes to pensions and ISAs, an increase in the National Living Wage, amongst a number of other things set to change.

What Is Inheritance Tax?

Inheritance Tax is the tax that is payable on someone’s death if the value of their estate is above the Inheritance Tax threshold and there are no available exemptions (for example a spouse or charity exemption).

For a single person, the threshold is currently £325,000 and tax is payable at 40% on estates over this amount. There is however an additional allowance known as the residence nil rate band which can be claimed were the deceased owned property which passes to their lineal descendants i.e. children and grandchildren.

Can I Reduce My Liability To Inheritance Tax?

Yes, if you have a taxable estate then you can do certain things during your lifetime to reduce the amount of Inheritance Tax that will become payable on your death. The first thing that you should consider is to seek estate planning advice from your solicitor, financial advisor or accountant.

Life Time Gifting

An easy way to reduce any potential Inheritance Tax liability is to make the most of the gifting allowances available to you during your lifetime.

You can make gifts using your annual allowance which is £3,000 every tax year.

If you choose to make a gift larger than £3,000 then as long as you survive for a period of 7 years following the date that the gift was made then the amount will be disregarded and will not be brought back into your estate for tax purposes on your death. However, if you die within the 7 years then some or all of that gift may be taken into account when calculating Inheritance Tax.

You can also make any number of small gifts up to £250 to different people, gifts out of normal expenditure and gifts in consideration of a child or grandchild’s wedding.