{"id":3756,"date":"2019-06-14T09:11:26","date_gmt":"2019-06-14T09:11:26","guid":{"rendered":"https:\/\/www.georgehay.co.uk\/blogs\/?p=3756"},"modified":"2023-11-16T08:35:25","modified_gmt":"2023-11-16T08:35:25","slug":"inheritance-tax-estate-planning","status":"publish","type":"post","link":"https:\/\/www.georgehay.co.uk\/blogs\/2019\/06\/inheritance-tax-estate-planning\/","title":{"rendered":"Inheritance Tax and Estate planning: Why is it so important?"},"content":{"rendered":"<p><span style=\"color: #000000;\">UK Inheritance Tax (IHT) receipts are currently at an all time high, hitting a record \u00a35.4bn in 2018\/19, and only look set to grow again in the coming year.<\/span><\/p>\n<p><span style=\"color: #000000;\">The nil-rate band (NRB), now in its tenth year of being frozen at \u00a3325,000, is key when it comes to protecting your estate and accumulated wealth from Inheritance Tax. <\/span><\/p>\n<p><span style=\"color: #000000;\">However, as the value of assets continues to rise and the nil-rate band remains static, many are finding that a larger proportion of their estate is vulnerable to the \u2018inheritance tax trap\u2019.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h5><strong><span style=\"color: #000000;\">It\u2019s never too soon to start planning<\/span><\/strong><\/h5>\n<p><span style=\"color: #000000;\">Many individuals fail to recognise the importance of Inheritance Tax and Estate planning; whether because they are reluctant to think that far ahead, or because they assume that IHT will not affect them. <\/span><\/p>\n<p><span style=\"color: #000000;\">However, planning is key to protecting your wealth and to making sure it is passed on in the most tax-efficient manner possible.<\/span><\/p>\n<p><span style=\"color: #000000;\">Inheritance Tax does not only impact the richest among us, nor is it a tax that should be ignored simply because of your age. After all, no-one wants to end up paying more to the tax-man than is necessary.<\/span><\/p>\n<p><span style=\"color: #000000;\">Above \u00a3325,000, IHT is payable on your chargeable estate. This would include gifts you made within seven years of your death.<\/span><\/p>\n<p><span style=\"color: #000000;\">However, even under the current rules, there are still steps you can take to minimise your future liabilities.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h5><strong><span style=\"color: #000000;\">Strategies to minimise your Inheritance Tax liabilities<\/span><\/strong><\/h5>\n<p><span style=\"color: #000000;\"><strong>1.\u00a0Will<\/strong> &#8211; Having a valid Will in place will ensure that your estate and assets are distributed in accordance with your wishes and in the most tax-efficient way. In the absence of such, the rules of intestacy will apply, which may not be tax-efficient.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"color: #000000;\"><strong>2.\u00a0Residence Nil Rate Band (RNRB)<\/strong> &#8211; The RNRB is an additional allowance to the NRB. It is only available if you pass your main residence to direct descendants. The current RNRB is \u00a3150,000 per person but is set to rise to \u00a3175,000 from 6 April 2020.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"color: #000000;\"><strong>3.\u00a0Spouse or civil partner exemption &#8211; <\/strong>Married couples and registered civil partners with an unused NRB, on the death of the first spouse, can have this utilised by the second spouse on their death. This means married couples and registered civil partners can effectively benefit from a joint nil rate band of \u00a3650,000. This rule also applies for the RNRB, increasing the tax-free amount available to a maximum of \u00a3950,000. Its also worth bearing in mind, that IHT is not payable on anything left to a spouse or civil partner who has their permanent home in the UK. Nor is it payable on lifetime gifts made to them.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"color: #000000;\"><strong>4.\u00a0Annual exemption &#8211; <\/strong>During your lifetime, the first \u00a33,000 of any gifts made in a tax year can be made without any Inheritance Tax consequences. If your exemption from the previous tax year was unused or partly used, you can carry forward the unused amount. Therefore, such gifts do not form part of your 7 year &#8216;clock&#8217;.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"color: #000000;\"><strong>5.\u00a0Potentially Exempt Transfers (PET\u2019s) &#8211; <\/strong>This is a gift to an individual that becomes exempt from IHT, if the person making the gift survives 7 years after making the gift. If the person making the gift dies within this period, the PET becomes chargeable to IHT.<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"color: #000000;\"><strong>6.\u00a0Investment &#8211; <\/strong>There are certain investments that become IHT-free after two years, as they qualify for Business Relief (BR).<\/span><\/p>\n<div><span style=\"color: #000000;\">\u00a0<\/span><\/div>\n<p><span style=\"color: #000000;\"><strong>7.\u00a0Charitable donations &#8211; <\/strong>You can reduce the rate at which IHT is payable, to 36 per cent, by leaving at least 10 per cent of your estate to charity. The donation is not subject to IHT and is not included in the taxable value of your estate.<\/span><\/p>\n<p><span style=\"color: #000000;\">\u00a0<\/span><\/p>\n<p><span style=\"color: #000000;\"><strong>8.\u00a0Pension funding &#8211;<\/strong> Pensions sit outside your estate and will not count towards your IHT threshold. Consequently, they are a means of leaving money to your beneficiaries and ensuring they keep as much of it as possible. Conditions apply depending on how old you are when you die and the type of pension you have in place.<\/span><\/p>\n<div><span style=\"color: #000000;\">\u00a0<\/span><\/div>\n<p><span style=\"color: #000000;\"><strong>9.\u00a0Trusts &#8211; <\/strong>Trusts can be extremely useful when looking to pass on assets in a tax-efficient way. Assets within a Trust, in certain circumstances, can be excluded from your estate for IHT purposes. This will ultimately help to minimise your liability. Trusts are complicated, so seek professional advice if you are considering this strategy.<\/span><\/p>\n<p>&nbsp;<\/p>\n<h5><span style=\"color: #000000;\"><strong>Author insight&#8230;<\/strong><\/span><\/h5>\n<p><span style=\"color: #000000;\">Barry Jefferd, Tax Partner at George Hay, comments:<\/span><\/p>\n<blockquote><p><span style=\"color: #000000;\">&#8220;Perhaps reluctant to think so far ahead, many people don\u2019t actively seek assistance with estate and inheritance tax planning\u201d<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"color: #000000;\">&#8220;As a consequence, the government is undoubtedly receiving tax that, with proper planning, wouldn\u2019t need to be paid.&#8221;<\/span><\/p>\n<p>&nbsp;<\/p>\n<p><span style=\"color: #000000;\">\u201cInheritance tax and estate planning is well worth doing, to protect as much of your wealth as you can and to ensure it is passed on in the most tax-efficient way possible.\u201d<\/span><\/p><\/blockquote>\n<p>&nbsp;<\/p>\n<h5><strong><span style=\"color: #000000;\">How can George Hay help?<\/span><\/strong><\/h5>\n<p><span style=\"color: #000000;\">Here at <span style=\"color: #ff6600;\"><strong><a style=\"color: #ff6600;\" href=\"https:\/\/www.georgehay.co.uk\/contact-us\/\">George Hay<\/a><\/strong><\/span>, we share your concerns about paying IHT and the complexities that accompany the regime. With our years of experience, knowledge of your circumstances and careful tax planning, those complexities can easily be overcome.\u00a0<\/span><\/p>\n<p><span style=\"color: #000000;\">If you\u2019d like to speak to one of our team about Inheritance Tax and Estate planning, call <strong>01480 426500<\/strong> or email <span style=\"color: #ff6600;\"><strong><a style=\"color: #ff6600;\" href=\"mailto:huntingdon@georgehay.co.uk\">huntingdon@georgehay.co.uk<\/a><\/strong><\/span><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>UK Inheritance Tax (IHT) receipts are currently at an all time high, hitting a record \u00a35.4bn in 2018\/19, and only look set to grow again in the coming year. The nil-rate band (NRB), now in its tenth year of being<\/p>\n","protected":false},"author":5,"featured_media":5905,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3,12,81,137,82,8,148,9,230],"tags":[153,135,138,98,140,356,246],"class_list":["post-3756","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-accounting","category-barry-jefferd","category-hmrc","category-inheritance-tax","category-legislation","category-personal-taxation","category-property-taxation","category-tax","category-team-member","tag-estate","tag-iht","tag-inheritance-tax","tag-investment","tag-nil-rate-band","tag-tax-planning","tag-trusts"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.7 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>Inheritance Tax and Estate planning: Why is it so important? - George Hay Blog<\/title>\n<meta name=\"description\" content=\"Inheritance Tax (IHT) receipts, according to official HMRC figures, hit a record total of \u00a35.4bn in the tax year 2018\/19.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.georgehay.co.uk\/blogs\/2019\/06\/inheritance-tax-estate-planning\/\" \/>\n<meta property=\"og:locale\" content=\"en_GB\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Inheritance Tax and Estate planning: Why is it so important? 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