Ten New Faces at RMT Accountants as Practice Expansion Drive Accelerates
June 1, 2018
Planning to minimise the liability to IHT is a team effort involving you and your professional adviser. To enable long-term objectives to be set, it is necessary to make decisions about your finances and your family. Currently only 5% of estates have a liability to IHT.
Now! IHT is currently payable where a person’s wealth is in excess of £325,000 (2012-13). Thus, if you own your own house and have some savings, life assurance policies, or business assets, your estate could be liable.
Most gifts made during your lifetime will be entirely exempt from IHT if you live for seven years after making the gift.
When you die, IHT will be charged on your personal wealth, together with all or a proportion of your lifetime gifts made in the preceding seven years.
The full rate of tax is 40%, but this is reduced on a sliding scale for gifts made between three and seven years before your death.
You must think about the following:
You need to make sure that you and your spouse are properly provided for, particularly in retirement. It would not make sense to give assets to your children only to find that in later life you need to ask for some or all of them back!
You need to think about what degree of control you would want your children to have over any assets you may transfer to them.
You also need to work out how much your spouse would need if you were to die first. This would, of course, have to be reflected in your Will.
In addition, you need to find out the intentions of parents or elderly relatives about their own assets.
In general, a business you control will attract business property relief of 100%. In other words, your business can be passed on with no IHT being paid.
Assets owned by you but used by a partnership in which you are a partner, or a company you control, attract business property relief of 50%.
Similar reliefs apply to agricultural property.
The IHT standard threshold of £325,000 (2012-13) defines the upper limit of what is commonly known as the IHT nil-rate band.
In the 2007 pre-budget report, the chancellor announced a new concession for married couples and civil partners. With effect from second deaths on or after 9 October 2007 the unused percentage of the nil-rate band from the first death estate can be carried forward and added to the nil-rate band available to the second. This combined threshold for couples is therefore set at a maximum of £650,000 for 2012-13.
This new arrangement applies no matter how long ago the first death occurred.
This fact sheet shows that we are living in an age of IHT planning opportunity. What you do is your decision, but the sooner you enlist the help of professional advisers the better. Remember, successful IHT planning has to be a team effort.
June 1, 2018