Inheritance Tax & Estate Planning

Financial advice for passing on an inheritance and managing an inheritance tax bill.

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Ways we can help you

Planning the Unexpected

Estate planning can save a huge amount of tax. Inheritance tax is usually charged at 40% on anything above your nil rate band. Taking action early means more of your money will go to your beneficiaries. There are many ways to manage, reduce or eliminate an inheritance tax bill, including:

Using tax-efficient investments to benefit from Business Relief
Using other assets to provide a retirement income and passing on your pension

Inheritance Tax & Estate Planning FAQs

Frequently asked questions about Inheritance Tax & Estate Planning:

What is inheritance tax?
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Inheritance tax is a tax charge (usually 40%) on any part of your estate that exceeds your personal allowance (also called the nil rate band). This is currently £325,000 per person. Your estate is a combination of your:

  • Property
  • Savings
  • Investments
  • Other assets, wherever in the world they are held
  • Any gifts you give away in the seven years leading up to your death
How much is the rate of inheritance tax?
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Inheritance tax is usually charged at 40%. The charge drops to 36% if you give at least 10% of your estate away to charity when you die.

What is estate planning?
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Estate planning involves planning how to pass on your assets in the most effective way. A significant part of this will usually be minimising inheritance tax. This could be achieved by using exemptions and allowances, making gifts, setting up life insurance or simply spending your money.

What is the residence nil rate band?
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The residence nil rate band is an allowance for passing on the family home. It is currently £175,000 and can be transferred between married couples and civil partners.

  • The allowance is tapered down for people with larger estates, reducing by £1 for every £2 that the estate is valued at over £2 million.
  • The residence nil rate band can only be used when passing on a residence to direct descendants and applies only to your home, not a buy-to-let property.
How can I make financial gifts?
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Making financial gifts is often the cheapest and simplest form of estate planning. You can make outright gifts that are tax-free, or gifts that are considered potentially exempt. You can also make gifts in trusts which will allow you to keep control over your money as you can choose who receives the gift and when.

What is a potentially exempt transfer?
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Gifts that are not immediately tax-free are considered potentially exempt. If you die within seven years of making a potentially exempt gift, it counts as part of your estate and may be subject to inheritance tax.

What is taper relief?
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If you made a potentially exempt gift that was greater than the nil rate band, you could benefit from taper relief (also known as the seven-year rule). This gradually reduces the amount of inheritance tax that is chargeable over the seven years after you made the gif

What is a trust?
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A trust is similar to a treasure chest. It is a locked box holding money or other contents for somebody else’s benefit. A trust is set up by a settlor (a truster in Scotland) and is managed by the trustees, who distribute the contents of the trust to beneficiaries.

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