Inheritance Tax (IHT) planning - sorting out your financial affairs

Inheritance tax (IHT) was introduced in 1986 to replace capital transfer tax which had been in force since 1975 as a successor to estate duty.

IHT is a tax paid on your assets (also known as your estate) when you die. In the 2005/06 tax year the UK Government collected over £3.2 billion* in inheritance tax.
* source www.hmrc.gov.uk

So long as the value of your estate is no more than £312,000 (for tax year 2008/09) there should not be any IHT to pay. This figure is the current nil rate band and it is normally increased on 6th April each year. Once your estate exceeds this figure IHT is payable at a rate of 40%.

Example: Mrs A dies and the value of her estate is £812,000. She has left her assets in equal proportion to her 3 children.

The amount of IHT payable would be:-

£812,000 - £312,000 x 40% = £200,000.

For further information about IHT visit www.hmrc.gov.uk/stats/inheritance_tax/menu.htm

Solutions to IHT

Our IHT planning service entails working with you, and, where appropriate, your legal and tax advisers to reduce the potential IHT liability on your estate and ensure that it is your intended beneficiaries that inherit your wealth.

Some of the simple steps that most people can consider are:-

Make a tax efficient will (see our wills advice).
Putting assets into a trust.
Placing life assurance contracts and pension plans in trust where appropriate.
Making use of the IHT nil rate band.
Using the various annual IHT exemptions.
Fund an insurance policy to provide cash to pay the IHT liability.
Transfer assets during your lifetime.
Making sure that pension scheme trustees have an up to date nomination of beneficiaries.

For more information and advice please contact Expert Financial Solutions.

Updated: June 2008

Expert Financial Solutions Ltd are independent financial advisers (IFA) / financial planners based in Witney, Oxfordshire. We serve the local community in and around Abingdon, Banbury, Bampton, Bicester, Burford, Chipping Norton, Cheltenham, Cirencester, the Cotswolds, Henley on Thames, Kidlington, Lechlade, Oxford, Wantage, Witney and Woodstock. We specialise in pensions, retirement planning, pension annuities, investments including PEP, ISA, OEIC, unit trusts and investment bonds, and inheritance tax (IHT) mitigation and trust investment. One of our advisers is a Chartered Financial Planner and we are proud of having Oxfordshire's only Resolution qualified and accredited IFA for pensions on divorce.