Inheritance
Tax Planning

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What is Inheritance Tax?

Inheritance Tax (IHT) is a tax on the estate of someone who has died, including all property, possessions and savings. The standard rate of Inheritance Tax is 40% and is charged on the part of the estate that is above the tax-free threshold which lies currently and up to 2028 at £325,000.

Branch Legal will guide you through IHT planning, enabling you to pass on as much of your estate as possible to your family or chosen beneficiaries, as opposed to HMRC. We will offer guidance and advice of how to maintain control over your assets.

What is the Inheritance tax threshold?

The Inheritance tax thresholds are based on a nil-band rate of £325,000, with the excess value of your estate subject to 40% tax. So, if your estate is valued at £500,000 IHT tax would be payable on £175,000 at 40%. Therefore, £70,000 could be payable to HMRC.

However, there is a Residence Nil-Rate Band (RNRB) of a further £175,000 if a main residence is left to a direct lineal descendent. This would change your potential total exemption from £325,00 to £500,000.

So, if your estate is valued at £525,000 with the use of RNRB (£175,000) and NRB (£325,000) IHT would be applied as 40% of £25,000 = £10,000

How much is Inheritance Tax?

To find out how much IHT you may be liable for depends on the value of your estate. You will need to calculate the value of your estate, this includes property, investments, pensions, life assurance plans and even family heirlooms.

If the value of your estate is below the £325,000 threshold, then normally no tax will need to be paid. If the value exceeds the individual nil-rate band of £325,000 threshold, then the part of your estate above it may be liable for tax at the rate of 40%.

There are a lot of rules and calculations to consider when you are trying to work out how much IHT you may be liable for, but we are here to help.

How to avoid Inheritance Tax

There are several ways that we can help you reduce how much IHT is due on an estate, it can be time consuming and complicated, but we can talk you through key strategies that will enable you to pass on as much as your wealth as possible.

Lifetime planning

It will be necessary to ascertain a full reflection of the client’s assets, previous gift-making history and family circumstances including their objectives to consider the best way in which these can be met.

Lifetime planning is an important part of minimising IHT. This will involve structuring asset ownership to ensure tax efficient investments and enhancing 100% relief from IHT wherever possible, using pilot trusts, interest in possession trusts, and reliefs such as BPR and APR. Our experienced consultants will guide you through the options and strategies available to you.

Lifetime planning for wealthier clients usually involves a combination of trusts, lifetime gifts and planning through a Will. All aspects should not be dealt with in isolation.