Back in 2012, the amount of inheritance tax (IHT) paid to the UK Government neared £3billion. In 2014, the amount of inheritance tax into HMRC’s coffers continues to rise, although the tax-free personal allowance will remain at £325,000 until 2015.
In the often complicated world of tax, IHT planning could ensure you can pass on as much of your financial value as possible to those you love, and could be worth thinking about sooner rather than later. Whilst you may want to get professional financial advice, here a few things you might want to consider:
Could you be liable?
Currently rules state that assets worth up to £325,000 can be passed on to beneficiaries tax-free. Above this value - the inheritance tax threshold - assets may be taxed at 40%. If you don’t have personal assets about the threshold, you may be exempt from inheritance tax.
This March is Free Wills Month. Having a will would mean that your wishes are carried out and your finances are handled in a tax-efficient way. Without a will, intestacy rules would come into play, which could mean that an immediate charge to inheritance tax could be made to your spouse or relatives. Our handy intestacy infographic shows what could happen if you were to pass away without a will (left).
Gifts given during the last few years of your life may be considered part of your assets, and therefore subject to IHT (if your assets are above the threshold). However, some gifts are exempt from inheritance tax, including: any given between spouses or civil partners, gifts given more than seven years before you pass away, gifts given to certain charities, a one-off gift of £3,000 to someone, or smaller gifts of £250 per person. If you’re thinking about giving gifts with this in mind, it might be worth keeping a record of them.
These brief considerations are exactly that: brief. Inheritance tax planning can be a complicated process. We’ve put together a series of pages with more information, or you can contact a financial adviser for advice (bearing in mind that they may charge for their services).