Inheritance Tax (IHT) (commonly called Death Duty) used to be something which only affected rich landowners, but this is no longer the case. The threshold over which IHT becomes due has only increased in line with inflation whereas property prices have increased substantially. As more people are now owner occupiers, this means that tax is now payable in most cases.

If you die leaving your estate to your husband or wife, then there is no IHT on the first death. This exemption does not apply to other people, including people who are living together.

A Double Taxation

The IHT rate on estates in excess of the threshold is a flat rate of 40% - regardless of the fact that this may be on a lifetime's earnings on which income tax has already been paid, or on assets on which Capital Gains Tax has been paid. In many cases it is effectively a double taxation.

Tax Efficient Wills

For married couples, no tax is levied on the first death, it becomes due on the second death. One of the key ways married couples can reduce their IHT bill is by making sure they use all their exemptions and incorporate a 'nil rate band discretionary trust' into their wills. Currently, over £120,000 can be saved by drafting wills in this way.

Pensions and Life Insurance Policies

Pension and life insurance policies are useful tools in reducing IHT and we will be able to advise you (in conjunction with your financial adviser) on whether these can be written upon trust to further minimise the IHT bill. This means that the money will then be paid directly to your beneficiaries and should not be subject to IHT.

Gifts of Property

It is worth noting that gifting your property to your children whilst you are still living in it does not make it tax exempt. The Inland Revenue takes the view that a gift is not a gift where the person making it retains an interest in it, and counts it in with your estate for tax purposes. On the other hand, if your children die before you, it will be taxed as part of their estate.

Other Gifts

Other gifts can be made to reduce IHT. These can be made into trust to protect the beneficiaries and the assets in the future.

Other Exemptions and Reliefs

There are reliefs for IHT, including exemptions for business and agricultural property. It is important that these are maximised.

Full Review

Our expert team will review your estate and provide you with a full report which will help ensure that your beneficiaries receive as much of your estate as possible. They will be able to advise you of the costs in advance. We will work as a team with your financial adviser and accountant (if relevant) to provide comprehensive advice.