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Tax Advisory Service

 

Introduction:

Estate planning is a critical aspect of securing your financial legacy for your loved ones. However, one potential hurdle in this journey is Inheritance Tax (IHT). In this article, we will explore the nuances of IHT and introduce you to Affinity Legacy Planning LLP's Tax Advisory Service. With the right strategies and guidance, you can ensure that your hard-earned assets are preserved for generations to come.

Understanding Inheritance Tax (IHT):

Inheritance Tax, or IHT, is a tax levied on the value of an individual's estate upon their death. This includes all assets, such as property, investments, money, and possessions. If an inheritance tax plan is not executed correctly, His Majesty’s Revenue and Customs (HMRC) could claim up to 40% of your estate's value from your family.

Exempt Amount (Nil Rate Band):

Every individual in the UK has what's known as a Nil Rate Band (currently set at £325,000). This means that up to this amount, your estate is exempt from Inheritance Tax. Understanding and effectively utilising this threshold can significantly reduce your IHT liability.

Main Residence Nil Rate Band (RNRB):

For those passing on their main residence to direct descendants, such as children or grandchildren, there's an additional allowance called the Main Residence Nil Rate Band (RNRB), which amounts to £175,000. It's crucial to make the most of this allowance to protect your family home from IHT.

Incorporating services like our Pre Paid Funeral Plans can complement this strategy, ensuring that every aspect of your estate planning is as comprehensive as possible.

Spousal and Civil Partner Exemption:

Assets left to a spouse or civil partner are exempt from Inheritance Tax, regardless of their value. Moreover, this exemption can also be transferred to the surviving partner, providing a powerful tool for preserving wealth within the family.

Lifetime Gifting:

One way to reduce the value of your estate subject to Inheritance Tax is by gifting assets during your lifetime. Small gifts, regular gifts, and certain larger gifts are exempt from IHT, making gifting a valuable strategy for estate planning.

However, it's crucial to have the right legal framework in place. Services such as Lasting Power of Attorney and Cohabitation Agreements play a vital role in facilitating these lifetime gifts while ensuring your wishes are carried out effectively.

The Seven-Year Rule (Potentially Exempt Transfers):

Gifts made more than seven years before your death are generally exempt from Inheritance Tax. However, gifts made within this timeframe are subject to a sliding scale of taxation known as taper relief. Proper planning can help optimise the use of this rule.

Utilising Trusts:

Placing assets into trust can effectively reduce the taxable value of your estate. Different types of trusts have varying implications for IHT, which is why it's essential to seek professional advice when considering this option.

Learn more about how trusts can be a cornerstone of your estate planning strategy by exploring our Trusts service. Our experts can guide you in selecting the right trust type for your unique circumstances.

Business Relief and Agricultural Relief:

Certain assets, such as businesses and agricultural land, may qualify for relief from Inheritance Tax. Leveraging these reliefs can be a valuable strategy for passing on such assets to heirs while minimising tax liabilities.

Gifts with Reservation of Benefit:

Be cautious about making gifts but continuing to benefit from them, such as giving your home to your children but still living in it. This can result in the gifted assets remaining in your estate for IHT purposes, defeating the purpose of the gift.

The Importance of Professional Advice:

Inheritance Tax Planning is highly complex, and tax laws are subject to change. To navigate this intricate landscape effectively, it's crucial to seek advice from a professional experienced in Estate Planning. They can help you develop a personalised strategy that maximises your wealth while minimising tax liabilities.

Conclusion:

In conclusion, understanding Inheritance Tax and its intricacies is a crucial step in preserving your legacy for your loved ones. With the guidance of experts and the right strategies, you can ensure that your assets are passed on efficiently, protecting your family's financial future. To explore how Affinity Legacy Planning LLP's Tax Advisory Service can work for you, contact us. Your legacy is our priority.

Contact Information:

To learn more about Affinity Legacy Planning LLP and how our Tax Advisory Service can help you secure your financial legacy, please contact us at contact us. Your financial future is in good hands. Connect with us on LinkedIn to stay updated on the latest wealth management insights and strategies.