11th August 2010: Is IHT a Voluntary Tax?

Up to 30% of IHT Payments can be avoided!

It is a well established fact that lacdk of forethought can lead to unnecessary Inheritance Tax charges; up to 30% of all IHT collected by H M Revenue and Customs could have been avoided by fairly basic tax planning.

A tax efficient Will

There are a number of basic steps that can be undertaken, that can be included in you Will.  Depending on the value of your estate and the assets within it, a brief IHT review may assist before instructing a lawyer on your family circumstances.

Can you give it away?

If you have a sizeable estate and a potential IHT issue, make full use of the gift exemptions; though they are quite small, these can be useful.

  • Annual gift of £3,000
  • Small gift of £250
  • On marriage; to child, £5,000
  • On marriage; to granchild or other descendant, £2,500
  • Gift to any other person of £1,000

Remember, if you make a gift of any size an then survive for 7 years, then that gift will be completely free of IHT charges.  Gifts within 7 years are subject to IHT on a sliding scale increasing to the full rate at death.

Gifts out of income

An often overlooked relief for people with a sizeable income - and wealth - is to establish a pattern of giving, as normal expenditure out of income.  This can establish a tax free gift pattern considerably in excess of other exemptions.

Can you rearrange your assets?

If an elderly relative has investments held that will in death be subject to an IHT charge, rearranging those investments to be held in a company or range of companies which qualify for 100% Busienss Property Relief may be an answer.

A capital gains holdover can be used to defer tax on a gain where funds go into an unquoted trading company.  On death, any deferred capital gains are wiped out an the base cost of assets raised to the value at death.

Remember:  Any IHT savings you make are passed directly to your family - not the Tax man!

For more information contact a member of the Booth Ainsworth Tax team.  Contact Peter Williams, Tax Manager on 0161 475 1582, or David Hardman, Tax Partner, on 0161 475 1581.