Alternative Investment Market (AIM) can be a tax perk for IHT
Making full use of the various opportunities to give money away is one available option to reduce your inheritance tax bill. Another way to take money out of your estate is to invest in small companies.
Making gifts to reduce Inheritance Tax liability
Giving away your wealth during your lifetime is one of the easiest ways to reduce a future inheritance tax (IHT) liability and can also be an effective way of saving your heirs a significant IHT bill.
Downsizing and the Residence Nil Rate Band
From 6 April 2017, the government will phase in a new residence nil-rate band, for when a residence is passed on death to a direct descendant. In addition to the Residence Nil Rate Band (RNRB) that can be used upon death, HM Revenue and Customs have confirmed an estate would also be eligible for the proportion of the residence nil-rate band that is foregone as a result of downsizing or disposing of the property.
Raising of the Inheritance Tax limit
The raising of the Inheritance Tax limit, announced by Chancellor George Osborne this summer, comes with a lot of caveats. The increase is a special Inheritance Tax concession made available only for family homes of people with children.
Distinguishing between Agricultural Property Relief and Business Property Relief
Inheritance Tax (IHT) is payable on death on a person’s estate above their nil rate band (currently £325,000) at a rate of 40%. In addition transfers out of a person’s estate by way of a gift are also taxable at a rate of between 20% – 40%, the rate charged being dependant on the nature and timing of the transfer.
Complexity of Inheritance Tax planning
The UK faces one of the highest effective rates of inheritance tax of any country in the developed world. Currently in 2015 it is 40% of any non-exempt assets over £325,000. Only France beats the UK in the G7 countries on that front.
Conservative Party propose a “Family home allowance of £175,000”
The Conservative party have announced that if they are re-elected, then from April 2017 parents would each be offered an additional £175,000 “family home allowance” to enable them to pass property on to their children tax-free after their death.
Timothy Clayton Hutchings penalty for trying to evade Inheritance Tax.
If you make any gifts of money or items of value over £3000 to another person( excluding your spouse or civil partner) these gifts are actually regarded chargeable transfers for inheritance tax purposes. At the point when the gift is made there is no charge as the gift will be considered a potentially exempt transfer (PET). A PET only becomes chargeable if you subsequently die within seven years of making the gift.
Investing in a business to avoid Inheritance Tax
Inheritance tax (IHT) is often called a voluntary tax. The possibility of avoiding or reducing IHT by just giving away assets and surviving seven years seems pretty attractive on the surface but can have implications if income is required or if the beneficiaries divorce.