Capital Tax Planning

The potential impact of Inheritance Tax is a concern to many people who would consider themselves to be only moderately wealthy - if the value of your assets exceeds the Nil Rate Band (£312,000 for the 2008/09 tax year) then your estate may be liable for 40% tax on the excess.

In the case of a UK domiciled married couple (or civil partners) there is no Inheritance Tax payable on assets passing from one to the other, and on the death of the survivor there can be twice the single Nil Rate Band available to be used against the survivor’s estate. However, where there is an excess over this figure, and in other cases, careful planning will be required to reduce the potential Inheritance Tax bill.

The steps that can be taken include:

• Lifetime gifts – there are some relatively modest gifts which are automatically exempt from the IHT net the moment they are given. More substantial gifts can be made which become exempt after 7 calendar years have elapsed. Gifts can be made outright or through a trust vehicle.
• Efficient use of Business and Agricultural Property Relief – this can be as much as 100% and so enable suitable assets to be passed on tax free.
• Charitable Donations – whether during life or on death, gifts to charities are totally exempt from IHT.
• Creating a fund from which the IHT can be paid – whilst this does not reduce the IHT bill itself, taking out a life insurance policy and writing it in trust can sometimes be a cost effective way of maximising the value your beneficiaries receive.
• Varying any inheritance you have received within the last 2 years – the 7 year survivorship requirement for lifetime gifts does not apply in this case as the Revenue see the gift as being made directly by the deceased person.

The advice you will require will depend on your individual circumstances which we will discuss with you in detail before making any recommendations or beginning any drafting.

Please contact us on info@mewiessolicitors.co.uk if we can be of any assistance.