Are you aware of and therefore using all of your possible IHT exemptions?

This video introduces a couple of the standard allowances available.

A video transcript is provided further below, if you would prefer to read about it.

IHT Exemptions – Video Transcript

The tax legislation rules and rates applying to inheritance tax makes for quite a large book.

This is both a blessing and a curse. It means you must tread warily in considering your future liability to inheritance tax as there are many factors to consider and it is easy to make mistakes and end up paying more tax rather than less.

But conversely, it also means you have many opportunities to reduce your future tax liability. And this starts with making sure you are using all the possible exemptions that are suitable for your circumstances and position.

If you are married or in a civil partnership, then you should check how your assets and liabilities are structured between you and how these are going to be divided upon death. You should ensure your will is up-to-date and correctly worded to support your wishes.

One of your allowances is the Residence Nil Rate Band, the extra allowance which can be used against your property.

IHT Nil Rate Band Allowance

But this is riddled with complexity.

For example, it can only be used against residential property left to direct descendants. And the value of this exemption reduces once your entire estate is above £2 million. So in some cases this allowance is easily lost and for a couple, if it is completely lost an extra £140,000 of inheritance tax would be payable based on the current value of this allowance and the current tax rate.

How your investments are structured can also make a difference.

For example, if you have money and ISA’s, these could be subject to inheritance tax but money in a pension might not be. Similarly, if you use investments that are subject to business relief then these can become exempt from inheritance tax once held for just two years.

The answer to utilizing available exemptions favourably is to get advice, and have an effective plan. There is much that can be done to effectively bring down an inheritance tax liability.

Using Exemptions Efficiently – Summary

  • Make sure you utilise your allowances to the full.

  • If you are a couple, where possible arrange your assets and liabilities between you for maximum IHT efficiency.

  • Check that you are using the Residence Nil Rate Band fully and do not get caught out by some of the complexities in this area.

  • Ensure your Will supports your IHT planning around utilising and maximising exemptions.

  • Consider moving assets that are liable to IHT into assets that are exempt from IHT (e.g investments that qualify for Business Relief).

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To speak to an IFA about IHT exemptions and estate planning, contact Tony Thomas on 07585 592494 or