Planning for the Future
Inheritance tax is usually charged at a rate of 40% on the portion of your estate that exceeds £325,000.
An extra tax-free threshold of £175,000 – known as the residence nil-rate band (RNRB) – is available in certain conditions. These include if you leave the family home, or a share of the family home, to direct descendants.
The RNRB gives a total potential tax-free threshold of up to £500,000 for individuals – or £1m for married couples or civil partners. However, the band reduces by £1 for every £2 of value by which an estate exceeds the £2m taper threshold. If the estate is left to the surviving spouse or civil partner on the first death, the taper is applied on the second death.
Furthermore, the percentage of any unused threshold allowance or nil-rate band from the first death may be transferred to the surviving spouse or civil partner, allowing up to double the nil-rate band applicable at the date of the second death.
Gifts or transfers made within seven years of death are also added back into the estate and might be taxable.
Taper relief may be available on any inheritance tax due where the gift was made between three years and seven years prior to death.
Are you taking advantage of exemptions, such as the annual £3,000 gift exemption?
Key Considerations
- Do you have an up-to-date will that reflects your wishes, and are you happy with its executors?
- Are you taking advantage of exemptions, such as the annual £3,000 gift exemption, gifts from income, and gifts on marriage or civil partnership?
- Do you have surplus assets that you can give away and thus potentially reduce the value of your estate chargeable to inheritance tax?
- Should you consider altering the spread of your investment portfolio into more inheritance tax-efficient products?
- Investigate the benefits of putting assets into trusts to reduce the inheritance tax impact.
Year-End Tax Guide 2023/24
If you would like to access our full year-end tax guide, simply click here to view the PDF.
Alternatively, you can view an area specific mini blog from the list below:
1. Personal Allowances and Reliefs
2. ISAs
6. Business Asset Disposal Relief
8. Tax-Efficient Staff Benefits
10. VAT
11. Penalties
Set Yourself up for Success
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