• Home
• Why Make A Will?
• Intestacy
• Services
  • Wills
  • Property Trust Wills
  • Lifetime Storage
    • Soc. Of Willwriters Storage
    • Lifetime Storage
  • Lasting Powers Of Attorney
  • Inheritance Tax
  • Disabled Children
• Free Information Pack
• Glossary
• Contact

Inheritance Tax Issues

Current UK legislation (as of April 2007) allows for the first £300,000 of your estate to be free from Inheritance Tax. However, although this may sound considerable, when you add up the value of your house, savings and investments and your personal effects, you may be very surprised by how much you are actually worth. With house prices rising as fast as they are, the value of your estate is likely to be a great deal more then the £300,000 Inheritance Tax threshold.

Consequently, under current legislation, the taxman will take 40% of everything you leave over the current £300,000 limit.

Many financial advisers believe that this tax can be reduced, if not eliminated, with some straightforward financial planning. We do not propose to offer in depth Inheritance Tax advice here as you best course of action would be to sit down with an independent financial advisor who can do a full fact-find of your situation, take account of all your current and future circumstances and advise you as to your best course of action.

Allowances

Your Personal Allowance

Each person currently has, on death, an allowance of £300,000, called the nil rate band, which includes: properties, personal effects, cars, savings, investments and insurance - collectively known as your estate.

Spouse Exemption

It is important to note that there is no Inheritance Tax on transfers (gifts), whatever the value, between married couples. However, if your spouse is non-domiciled then the allowance is limited to £55,000.

Annual Exemption

Everyone can give away up to £3,000 per tax year, say, to one child or shared between several children. Obviously, for a couple this would mean a maximum of £6,000 pa.

Marriage Gifts

Exemption Parents can make wedding gifts of up to £5,000 to each of their children. Grandparents can, however, also make gifts. They can give up to £2,500 to each marrying grandchild. Also, you can give up to £1,000 as a wedding gift to anyone else. The gifts must be made before the wedding day, not after.

Potentially Exempt Transfers (PET)

In msot cases any amount of the exempt gift allowance, as mentioned above, is a Potentially Exempt Transfer (PET). PETs can be given to the person concerned directly or as an investment for them.

To become completely exempt the donor needs to live for at least 7 years from the date of the transfer, in which case it falls outside of the estate. During the 7 year period the amount of Inheritance Tax payable reduces the longer the time after the gift has been made. This is known as Taper Relief.