Inheritance Tax

Please, please do not fall in to the trap of procrastination. Inheritance Tax is one of the most unpopular taxes as many see it as a tax on assets which have already been taxed. It was supposed to be a tax on the rich. Instead it is now a tax on most home owners. Inheritance tax is payable at 40% on the portion of your estate in excess of £300,000 (the Nil Rate Band).

There are a number of measures that can be taken to reduce the impact of Inheritance Tax on your estate and the younger you start the better.

If you are married, or in a registered civil partnership, you can use your Wills to protect the value of each of your Nil Rate Bands. You will probably need to equalise your assets as well. This simple step could save your estate £120,000 of tax.

You can give away your assets. However this may not be advisable or indeed realistic.

You will need to look at the options open to you. These are broadly divided into those which make use of the IHT exemptions given to qualifying trading companies and those which use trusts. Trusts are not regulated by the Financial Services Authority. You may be familiar with some of the former such as the Close Brothers residential property trading scheme or a portfolio of qualifying AIM listed companies or an enterprise investment scheme.

There are a range of trusts which would need face to face explanation. It really depends on how much access you require to the capital and/or income. The trusts might include Loan Trusts, Flexible Inheritor Trusts or maybe Discounted Gift Trusts.

As I am sure many will have realised tax legislation can and does change which does not help in planning. However we can make arrangements which should work now and which can be reviewed to meet new legislation if necessary in the future.

There is not enough space to go into any great detail or mention all the tax planning available. So don’t procrastinate. Speak to your IFA or the only person who will thank you will be the taxman’

AIM investments are generally of a higher risk and the value of your investment can fall as well as rise. The value of property is generally a matter of a valuer’s opinion rather than a fact.

For more information contact Langtons today for an initial review with no charge or obligation.

Taxation rules can and do change.  The figures in this bulletin are based on the 2006/2007 tax year.