Inheritance tax (IHT)

IHT is, by and large, a voluntary tax. For many, most IHT can be avoided or mitigated.

Inheritance tax is currently 40% on all unprotected assets above £1,000,000 (for a couple), that is likely a big number for you. Even worse, IHT is due 6 months after the date of death.

We avoid esoteric and controversial solutions when it comes to IHT planning to avoid unnecessary HMRC scrutiny. There are a range of tried and tested options that can help.

These range from using available allowances, lifetime trusts, life cover and IHT protected investments. In combination massive IHT savings can be made.

For example, every UK individual has an annual IHT gift allowance that is often missed. Larger gifts up to £325,000 can go into trust without an immediate tax charge and the value of which (plus any growth) falls outside your estate after seven years, at which point another £325,000 could be gifted. If you are a couple, you can double these allowances.

And then, most overlooked but most relevant to high earners, there is the “normal expenditure out of income exemption” which allows excess income to be gifted immediately out of your estate.

Each option comes with caveats over allowances, access, control and risk – there is no silver bullet. But in combination it is possible to create a multi approach strategy tailored to you.

We can help you make some quick easy wins that could save your family a fortune. Simply adding up the basic allowances above could save a couple potentially £276,800 in IHT (ignoring the investment growth on the gifts) every seven years.


Posted on

March 16, 2022