Inheritance Tax Planning (IHT)

A number of years ago inheritance tax was called “a voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue”. That was former Chancellor Roy Jenkins, and his point was that there are many ways to mitigate inheritance tax, or IHT, if you do your homework.

There are a number of different ingredients that make up the value of your estate. The bill that your beneficiaries have to pay can be complex, therefore some in depth calculations are required to work out your potential liability in order to best mitigate any potential tax bill upon your death.

inheritance tax planning

How can estate planning benefit you?

Paid on a person’s estate after they die, an inheritance tax bill must often be dealt with at a difficult time. Involving complicated calculations, it is not always easy to work out and often comes as an unwelcome cost which those left behind are financially unprepared for. At Hartey Wealth Management, we provide an inheritance tax planning service providing immediate or ongoing support from tax specialists.

What is inheritance tax?

Inheritance tax is a mandatory government levy that is paid on a person’s estate (Including money, investments, property, and possessions) when they die. As a result, it can reduce how much wealth ultimately passes to their beneficiaries. The definition of a beneficiary is an individual that you wish to leave assets and money to when you pass away. Inheritance tax can also require paying on certain types of gifts made while a person is still alive.

Whether or not inheritance tax is payable depends on the value of a person’s estate. If this value exceeds a specific threshold called the “nil-band rate” all wealth beyond the limit is taxed at a set percentage. While fixed at present, both the nil-band rate and the percentage are likely to change with time.

Inheritance tax is levied on the assets of a person whose permanent place of residence is the UK. However, it also applies to UK-based assets of those living abroad. As a result, whether you are a UK citizen with a holiday home overseas or a foreign national with assets or property in the UK, if the value of these assets exceeds the set nil-band rate inheritance tax must be paid upon death.

Some exemptions always apply. For instance, if a person leaves their wealth to their surviving spouse, no inheritance tax is payable.

What does a person’s estate include?

A wide range of different asset are considered part of a person’s estate and subject to inheritance tax. An estate can include savings and investments, but also your home and any commercial property you possess. High value items like cars, jewellery, and artworks can also be taxable so if you have led a prosperous life, your inheritance tax bill can be considerable.

How does inheritance tax planning work?

Put simply, the dual aim of inheritance tax planning is to help people pass more of their wealth to their selected beneficiaries while simultaneously ensuring that their financial security is never compromised in their lifetime. As a result, to ensure that your personal estate is passed on according to your wishes and provides adequate provisions for those you leave behind, effective inheritance tax planning is critical.

Our expert team work closely with our clients to understand their wishes and requirement both in life and when their time comes in death. We provide a comprehensive service covering all aspects of inheritance tax planning.

We can provide suitable investment strategies to achieve your individual ambitions. For example, a strategy that is focused on preserving capital instead of capital growth can help you generate and even increase your personal wealth in a tac-efficient way.

Another option is to implementing mitigation strategies regarding inheritance tax which can help you reduce the size of your overall bill. Such strategies are designed to have no impact on your financial security and ensure you retain the sufficient assets required in retirement. This approach can be achieved by using range of different investment vehicles and trusts.

Speak to us at Hartey Wealth Management about your needs and wishes both now, in life, and in death.

We can help by:

  • Providing appropriate investment strategies, perhaps geared towards capital preservation rather than capital growth, to generate or increase income in a tax efficient way.
  • Implementing Inheritance Tax mitigation strategies whilst retaining sufficient assets to ensure financial security. This could be achieved by utilising a wide range of trust and investment based approaches which are designed to meet both aims.
  • Arranging affairs so that estates pass to chosen beneficiaries in a tax and cost efficient way, without compromising financial security during a lifetime.

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