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Inheritance Tax Planning


Inheritance Tax Planning - Quick Summary of Inheritance Tax (IHT)

 Inheritance Tax Planning can save you pile of cash

In UK law, Inheritance Tax is charged to a person's estate following their death

Currently No Inheritance Tax is paid on the first £325,000 of a person's estate
If a person's estate exceeds £325,000 then the excess will be charged at 40%
The persons estate includes the family home as well all other assets owned
Any assets left to a spouse, civil partner or charity are exempt from IHT (Known as an 'exempt' transfer)
You must make a will leaving your estate to your spouse or civil partner otherwise IHT may be charged
If you leave your estate to your spouse or civil partner then they can also use your IHT allowance as well
Inheritance Tax is complex and involves large amounts of money - always seek professional advice


Inheritance Tax Planning Thresholds and Rates Table


Information last updated:


Tax Year

 IHT Allowance
2000 - 2001 £234,000
2001 - 2002 £242,000
2002 - 2003 £250,000
2003 - 2004  £255,000
2004 - 2005 £263,000
2005 - 2006 £275,000
2006 - 2007 £285,000
2007 - 2008 £300,000
2008 - 2009 £312,000
2009 - 2010 £325,000
2010 - 2011 £325,000
2011 - 2012 £325,000
2012 - 2013 £325,000
2013 - 2014 £325,000
2014 - 2015 £325,000
2015 - 2016 £325,000
TOP TIP: This IHT Tax allowances above are applicable on the death of a single person or the first spouse or first Civil partner. However, in the case of a partnership, the surviving second spouse or second Civil partner can also benefit from a transfer of the first partners IHT Tax allowance. Effectively this means that for 2012/2013 married couples and registered civil partners will not pay tax on the first £650,000 of their estate (£325,000 + £325,000). Tax is again then payable at 40% on any amount over this threshold. It is therefore tax effective for couples to leave everything to each other before leaving any of their estate to their children.


According to HMRC Inheritance Tax will remain at £325,000

for both tax years 2014 - 2014 and is expected to remain so until at least 2017


Please see HMRC webpage below




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Useful Capital Gains Tax Advice Websites




Inheritance Tax Exemptions

  Most transfers between spouses and civil partners are exempt
The first £3,000 of lifetime transfers in any tax year plus any unused balance from previous year
Gifts of up to but not exceeding £250 p.a. to any number of persons
Potentially Exempt Transfers (PETs) - are gifts made during a lifetime that have exceeded the annual gift allowance of £3,000 but are inside the current Inheritance Tax Threshold (£325,000). Provided the donor survives for a further 7 years, no tax will be payable and the gift becomes a PET. In the event of death within the 7 years however, tax will be payable but if this occurs after 3 years, taper relief is available, thus reducing the amount of tax due.
Trusts and life assurance can be used to create Inheritance Tax exempt sums of capital
Inheritance Tax (IHT) and Business Property Relief (BPR) is a complete exemption from Inheritance Tax and can be secured on an Owner Managed Business (OMB)

More information about IHT and BPR

TOP TIP: Be very careful of not falling into the 'Gifts with reservation'  trap. These are gifts that you make to loved ones which you continue to benefit from. i.e. The classic example being that of giving your house to your children while you carry on still living there whilst paying none or below-market-value rent.  These gifts are still subject to Inheritance tax when you die. Always seek professional advice before going down this route.


Gifts that are exempt from Inheritance Tax

  Gifts to you your husband, wife or civil partner, as long as they have a permanent home in the UK
Gifts to a registered charity established in the EU or another specified country, whether made during the persons lifetime or as part of their will
A gift to some national institutions such as museums, universities or the National Trust
Gifts to any UK political party that has at least two members elected to the House of Commons or has one elected member but the party received at least 150,000 votes
Gifts of up to but not exceeding £250 per year to any number of persons
Gifts in consideration of marriage or civil partnership of: up to £5,000 by a parent, up to £2,500 by a grandparent, or up to £1,000 by any other person

Gifts that are NOT exempt from Inheritance Tax

  Gifts that you give to your unmarried partner, or a partner that you're not in a registered civil partnership with, are not exempt.

Inheritance Tax Calculator For 2014 - 2015

Click here to access a Inheritance Tax Calculator for 2011

    Budget - Inheritance Tax Changes


From April 2012 - There will be a reduced rate of Inheritance Tax of 36% for any estate leaving a legacy to charity. If 10% or more of the estate is left to charity, then the government will take 10% off the Inheritance Tax rate. No beneficiaries will be better off as a result of this change - just the charities.


Inheritance Tax Advice Book by Tax Cafe

How to Avoid Inheritance Tax   How to avoid Inheritance Tax - This book tells you all you need to know about how to legally shelter your family's money from the taxman. Taking into account both simple and complex tax planning strategies, the guide is essential reading for both parents and grandparents.



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