insideKENT Magazine Issue 34 - January 2015 | Page 131
BUSINESS
PLANNING
FOR
INHERITANCE
TAX
INHERITANCE TAX (IHT) CAN COST HUNDREDS OF THOUSANDS
IN THE EVENT OF A DEATH. HOWEVER, WHILST IT MAY NOT BE AT
THE TOP OF YOUR LIST OF THINGS TO THINK ABOUT, IHT SHOULD
BE FACTORED IN AND CAREFULLY PLANNED FOR. IT IS POSSIBLE
TO MITIGATE THESE TAXES AND YOU CAN END UP LEAVING YOUR
LOVED ONES MORE OF YOUR ESTATE.
First, you’ll need to work out how much tax will
be owed on your estate; therefore, you will need
to know how much your estate is worth. Your
assets will include any cash, investments,
property, vehicles and pay outs from life insurance
payments. When calculating your estate, you can
deduct your debts from these assets and
subsequently work out what inheritance tax is
owed on that.
Subject to certain exemptions for assets that are
used in business, for example, your estate will
automatically owe 40% tax on anything above
the current £325,000 inheritance tax threshold
when you pass on. If you decide to leave 10%
of your assets (or more) to charity, this inheritance
tax will be reduced to 36%.
So, if your estate will be worth more than
£325,000, which is likely if you own your own
property and have savings, you will need to plan
to deal with inheritance taxes. If your assets are
worth £600,000, for example, then your loved
ones will pay nothing on the first £325,000, but
they will pay 40% tax on the balance of £275,000.
The current government has proposed raising
the threshold to £500,000 in the future, but this
has yet to be legislated for.
One valuable exception to the inheritance tax
rules is that if you are married or in a registered
civil partnership. In this case, all of your assets
left to your spouse are free from inheritance tax.
Your spouse will also gain your tax-free allowance
if you have not used it, so that in the event of
their death, they can leave up to £650,000 of
your joint assets tax-free.
The easiest way to avoid any taxes after your
tax-free allowance is to think about what you
want to give to people many years before you
die. Of course, nobody knows when they're going
to die, but this will make a difference to your
tax bill.
It is common for people to give gifts of money
whilst they are still alive – but be careful, as this
too will be subject to inheritance tax if the person
dies within seven years of making the gift.
This does not apply however, if the gift is up to
£3,000 as a donor can give this amount away
each year and it will be completely free from
inheritance tax.
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It’s important to seek financial advice when it
comes to planning your inheritance and your Will
should be constructed under the watchful eye of
an expert. Except for HMRC, nobody wants you
to pay inheritance taxes, so a financial advisor
will lead you in the right direction.
If you would like any more information about
Wilkins Kennedy’s services, please contact
Rick Schofield on 01233 629255 or
[email protected].
www.wilkinskennedy.com