Inheritance Tax is something you can try to reduce or expunge altogether through careful planning. Roy Jenkins famously said ‘Inheritance Tax is, broadly speaking; a voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue!’
There are various ways of Inheritance Tax planning including: -
- Spending your wealth, sometimes referred to as Skiing (spending the kids inheritance)
- Insuring the liability
- Investing into assets that are exempt from Inheritance Tax, normally after two years
One area of Inheritance Tax planning that is often overlooked is that you can also cut the Inheritance Tax rate on your estate from 40% to 36%, if you leave at least 10% of your ‘net Estate’ to a charity.
Your net Estate is the value of your Estate after applying other reliefs such as the Nil Rate and Residence Nil Rate Bands. For instance, if your ‘net Estate’ was £100,000 the normal Inheritance Tax liability would be 40% or £40,000. By gifting £10,000 in your Will to a registered Charity, the Inheritance Tax would reduce by £7,600 to £32,400 (36% of £90,000 ‘net Estate’).
If you support a Charity, this can be an effective way of enhancing this support, whilst reducing the rate of tax on death. This could be used as part of your wider Inheritance Tax planning strategy.
Of course, if you need help with the above points, or any other matters relating to the recent Budget, please do not hesitate to contact your Wealth Manager at NW Brown.