Inheritance tax spikes highlight the importance of effective planning!
A recent Office for Tax Simplifications (OTS) Inheritance Tax (IHT) review concluded this tax is “widely misunderstood, unnecessarily complicated and that several exemptions should be scrapped.” In the year to the end of February 2018 tax receipts have reached a record high, increasing significantly and raising £5.3bn.
Despite this fact, only 4 % of estates pay IHT, which is why the Association of Account Technicians (AAT) believe the facts around IHT must be more effectively communicated to the public, as many wrongly believe they will not be affected. Included in the general confusion around IHT are the many exemptions which can help reduce people’s IHT liability, yet which most are unaware of, such as regular gifts out of your income and marriage gifts. Care must be taken around these to ensure that you comply with the rules. The AAT has stated that these exemptions are only usually being used when professional advice is sought.
The most recent data does not illustrate the full impact of a new “residential” nil-rate band introduced in 2017, in addition to the £325,000 standard nil-rate band. The new residence nil-rate band applies to deaths on or after 6 April 2017. It will allow individuals with direct descendants to pass on an additional £125,000 this year, with savings eventually rising to £175,000 by the 2020/21 tax year, subject to certain conditions. However, the rewards of the Residence Nil Rate Band can only be reaped upon satisfying the stipulated, yet complex criteria.
How we can help
At McCrea Financial Services we have a wealth of knowledge of the taxation system and would be more than happy to assist in ensuring you leave as much as possible to the people you wish to receive your estate.
We fully review your financial affairs to identify what the current liability is. It is also of great importance that we discuss your capital and income needs moving forward as this can have a significant bearing on our advice. Whilst it is important for most clients to minimise their potential inheritance tax liability, this must not get in the way of their ongoing way of life.
We work together with a carefully selected panel of trusted professional connections, such as solicitors, who can help ensure your legal affairs (wills and trusts) are set in place correctly to meet your Estate’s requirements.
Whichever route is appropriate for you, working in conjunction with us is very important. This will ensure your planning is done correctly. We can help remove the complexity around Inheritance Tax, taking into consideration and managing all the rules and exemptions for you, to ensure the best possible outcome for you and your family.
Find out how we can help you and if you would like to arrange an initial free no-obligation meeting you can do so by calling us on 0141 572 1340 or by emailing firstname.lastname@example.org.
You can also visit our website for information on Inheritance Tax and The Residence Nil Rate Band here.