Your simple guide to inheritance tax

Don’t let inheritance tax decimate your legacy – secure your family’s future with expert planning

Inheritance tax (IHT) has long been a topic of concern for individuals and families across the UK. While many perceive IHT as a tax solely levied at death, it’s crucial to understand that various events during your lifetime can also trigger an IHT charge.

In this guide, we explore the complexities of IHT, explaining what constitutes an estate, who needs to pay, how much is owed and most importantly, strategies to minimise your IHT liability.

What makes up an estate?

Contrary to popular belief, an estate is not limited to just your home. It’s a combination of all your assets, including money, properties, investments and even valuable possessions like classic cars and artwork.

Each component of your estate contributes to the total value subject to IHT. Therefore, it’s essential to quantify all your assets and understand their implications in terms of inheritance tax.

Do you need to pay IHT?

Determining whether you need to pay IHT depends on the total value of your estate and your understanding of IHT thresholds, allowances, and exemptions. The current standard rate of IHT stands at 40%, but there’s a reduced rate of 36% available if you leave at least 10% of your net estate to charity.

Don’t fall into the inheritance tax trap

While the tax-free threshold of £325,000 may sound generous on the surface, it doesn’t take much for even a seemingly modest estate to exceed this once all your assets are totalled up. From the family home and cash savings to investments, pensions, cars, jewellery, art and other possessions – it all counts towards your taxable estate. For many, inheritance tax turns out to be a rude awakening they didn’t see coming until it was too late to plan accordingly.

Calculating your IHT liability involves subtracting the tax-free threshold from the total value of your estate and applying the appropriate tax rate. For instance, if your estate is valued at £600,000 and you qualify for just the standard tax-free threshold, the taxable amount would be £275,000, resulting in an IHT liability of £110,000.

In the above example, £110,000 went to HMRC rather than your intended beneficiaries due to lack of IHT planning. Can you really afford to have no planning in place?

Minimising your IHT liability: effective planning strategies

Given the substantial impact of IHT on your estate, it’s imperative to explore effective planning strategies to minimise your tax liability. Tax-efficient investments, ISAs, pensions, and gifting strategies are just a few avenues to consider. Utilising annual exemption, out-of-income, business property relief and life insurance can further mitigate your IHT liability.

However, it’s essential to note that planning strategies should be implemented during your lifetime to maximise their benefits. By proactively managing your estate and utilising available allowances and reliefs, you can significantly reduce your exposure to inheritance tax.

At AF Tax Solutions Ltd, we understand just how complex tax laws and legislation can be. Our experienced tax specialists can provide advice to mitigate your IHT liability and help ensure that your beneficiaries receive what you have intended for them.

Why choose AF Tax Solutions Ltd?

With something as important as your lasting legacy at stake, you need to partner with tax experts who have an impeccable track record of developing inheritance tax strategies that mitigate IHT. We continually stay ahead of the curve on all updates to tax policy, legislation and HMRC guidance to develop strategies fully optimised for your circumstances.

We focus on building lasting relationships with our clients. We take the time to understand you as an individual – your background, values, family situation and biggest priorities. We can help you implement strategies to mitigate your IHT liability in order to preserve wealth in line with your succession plans.

Don’t let inheritance tax derail your family’s future

By partnering with AF Tax Solutions Ltd, you’ll benefit from expert IHT planning advice and forward-thinking strategies needed to overcome any IHT hurdle.

Your family’s lasting legacy and financial security are simply too important to leave to chance. Contact us today to schedule your free, no-obligation inheritance tax review consultation. Let’s get started on developing a personalised plan to preserve your wealth and ensure your loved ones receive every penny intended for them.