INHERITANCE TAX PLANNING
YOUR EVERYS EXPERTS
The current threshold at which inheritance tax (IHT) becomes payable on an estate is £325,000 for a single person. This is known as the nil-rate band. When a spouse or civil partner dies, their unused allowance can be transferred to their surviving partner. Provided they have not used up and exceeded their other allowances, a total of £650,000 may be passed on free of tax. IHT is then charged at a rate of 40% on the remaining estate.
As of 6th April 2017, however, new rules are being introduced which will see an additional allowance of £100,000 per person be added to the existing nil-rate band, making a single person’s allowance £425,000. This new ‘main residence’ nil-rate band will allow an estate up to £850,000 (a couple’s £650,000 allowance plus their £100,000 each) to be passed on to direct descendants tax-free. Over the next few years, the threshold will increase so that by the 2020/21 tax year, direct descendants may inherit estates worth £1 million without having to pay IHT. For a single person, the maximum amount they may pass on without IHT being incurred is £500,000.
This new allowance is being introduced to help ordinary families who have seen their IHT liabilities increase due to the rise in property prices in recent years. The new allowance will not benefit everyone, however. Estates above £2 million, but less than £2.7 million, will have their nil-rate band reduced by £1 for every £2 above the £2 million mark. Estates worth more than £2.7 million will not be entitled to any nil-rate allowance.
These new rules are not straight-forward and advice should be sought to ensure that you take advantage of all the allowances available to you to prevent the taxman from taking what should rightfully be passed to your beneficiaries.
Contact one of our Private Client lawyers now to see how we can help you mitigate your liabilities through the use of various exemptions outside of the IHT threshold.
There is more to succession than just handing over the reins to the next generation in a family business or farm. Succession requires planning and commitment and should involve family members as early as possible so that they grow up understanding the culture and essence of the business.
With new leadership comes new ideas and innovation, however, you want to be sure that the next generation shares your values and vision for the business. A solid succession plan will ease any family tensions and give you peace of mind.
Succession planning provides a clear training and development programme for the future leader of the business so that they are in a strong position when the time comes to take up those reins. Succession planning ensures stability, continuity and certainty that your business will be in safe hands and makes the transitional process smooth and efficient. It allows you to plan for your retirement, giving you an income, and you can decide how much influence or control you wish to retain.
It is never too late to start succession planning, but if you fail to do it, then, eventually, someone else, whose vision may be different to yours, will be at the helm which could lead to the business floundering and banks losing confidence in the management of the business.
Our Private Client lawyers will help you reduce any tax liabilities, thereby preserving your wealth, and help create an exit strategy which will address the needs of the business and your family.