Personal Tax

Inheritance Tax Planning

You will want to pass on as much wealth to your family and other loved ones as you possibly can.

Our experts will help to structure your financial interests and affairs to minimise any taxes that may be payable from your estate. This will help to ensure that your beneficiaries receive the maximum benefit from your estate that you intended.

Taking the time to arrange your estate tax efficiently may also avoid the need for your beneficiaries to sell some of their inherited assets to meet any future tax bills that may come their way from HMRC.

Inheritance tax of 40% may be payable on your estate. The first £325,000 (£650,000 if you are married or in a civil partnership) is exempt. This is known as the IHT nil rate band which will remain at this level until 5 April 2026. 

There is an extra allowance applying to your main home. The residence nil rate band (RNRB) is £175,000 and the RNRB taper will continue to apply where the value of the estate is greater than £2 million. 

Couples can combine their RNRBs which can take the value of your IHT free estate up to £1,000,000 where a main residence is included.

RNRB can be complex and there are a range of qualifying conditions which we will discuss with you during your planning consultation.

Your inheritance tax exemptions

Inheritance tax planning is generally not related to the tax year end, although this is as good a time as any to review your will and ensure your stated wishes are up to date.

There are certain IHT exemptions related to the tax year.

  • Gifts totalling up to £3,000 in a tax year are exempt from IHT. If you didn’t use this exemption in 2021/22, you can make IHT-free gifts of up to £6,000 before 6 April 2023. If you have already used your exemption for 2022/23, you could delay your next gift until after 6 April 2023 to take advantage of the 2023/24 exemption.
  • Gifts of up to £250 to any person in any one tax year are exempt. You can use this exemption for any number of different recipients.
  • Regular gifts out of excess income can also be exempt, with the amount of excess income determined each tax year. You need careful documentation to prove that you made the gifts from income rather than capital.

Other reliefs that may be available to you

If you meet the conditions for Business Property Relief (BPR) you can potentially remove the full value of a business – sole trader, partnership, shares in private company – from being subject to an IHT charge, either via lifetime gifts or on death.

If you own farmland or pastures, woodlands occupied with agricultural land, buildings used in connection with agriculture and, in some cases, farm cottages and houses, you may qualify for Agricultural Property Relief (APR).

The rules can be complex, but these reliefs are there to avoid the need for your beneficiaries to sell assets in order to pay the IHT demand from HMRC.

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Our Personal Tax Expert Emily Wilson

Emily Wilson is ammu’s corporate and personal tax associate with a first class honours degree in accounting and finance. Emily also attained further qualifications from the Association of Tax Technicians (ATT) and the CTA from Chartered Institute of Tax.