Inheritance Tax, or IHT as we insiders call it, is still a subject which worries a lot of people. Surprising, in a way, as it’s the only tax which you don’t have to pay; it’s not payable until you’re dead, so it’s those that you leave behind, or, more specifically and technically, your estate which gets the bill. The principle behind it, however, still grates: it’s a second bite of the cherry for the taxman, on the savings and assets on which you’re already likely to have paid income and, maybe, capital gains tax. If you were hoping to leave a reasonable nest egg to your children or grandchildren, it could take a big slice of their cake away. Interestingly, it’s often those who don’t, when we do the sums, have a problem who worry most. A husband and wife can, between them, leave £650,000 free of inheritance tax, and, since this nil-rate band allowance has been transferable between husband and wife, it’s been relatively simple to take advantage of this. And many who do have a problem, aren’t worried. They take the view, rightly or wrongly, that their children will do pretty well, and don’t want the hassle, expense or potential risks of doing something about it. What can you do, if your worldly worth (which includes everything, your ‘worldwide assets, from the villa in Spain down to the lawnmower in the shed), is more than the £325,000, or £650,000 joint allowance? Give it away and live seven years: Fine if you’re healthy and not likely to need it. Spend it: Obvious, but, alas, the older you get, the less you want to. Put it in trust: See option 1, means you can keep some control and, with the right trust, continue to get some income Pay it at a discount: Which means taking out good, old-fashioned life insurance to provide money to pay the bills. Other options: Buy a farm, or farms, popular with rock stars and the like; or buy shares in an unquoted company and keep them for two years. Lots of, often complicated schemes are around to take advantage of this. Bottom line: The Treasury collected £2.9bn from IHT in 2011/12 and expects that to rise to £4.1bn in 2017/18. The Conservatives were going to increase the limit to £1m, but have frozen it at £325,000, realising, as most governments do, that it’s an easy earner. If you’re worried, talk to us and take advice!
Posted on: Sun, 16 Jun 2013 18:16:37 +0000