Inheritance Tax (IHT) planning is one aspect of financial planning that is often neglected, which can, in many instances, be a very costly error of judgement. Upon death, as matters stand, each individual has a “nil rate band” allowance which is exempt from IHT. For 2010/11, this stands at £325,000 and whilst this is a substantial sum, often the home represents a large proportion of this allowance alone. Any excess above the allowance is then taxed at 40%.

Transfers between spouses on death are exempt from Inheritance Tax. Previously this was a very inefficient approach to take but now, where one spouse leaves some or all of their estate to a surviving spouse on death any unused “nil rate band” allowance will be passed on to the survivor in full. The survivor then has up to a double allowance available to offset against their estate on death. For 2010/11 this equates to £650,000.

Unfortunately, even with the recent Inheritance Tax reforms for many the need for Inheritance Tax planning is still significant. Options may involve gifts during lifetime, the establishment of a lifetime trust, holding “exempt assets” by way of certain investments, life insurance in trust anda Deed of Variation with any recent inheritance.

For further advice on this subject, please do contact the Office.

 

 
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Risk Warning - Stockmarket investments can offer income through the payment of dividends and interest and good opportunities for capital appreciation over the longer term. By this, generally we mean periods in excess of five years, preferably much longer. However, we can never promise you particular returns, especially in the short-term. At any point in time but especially in the short term, your capital could be worth less than the original amount invested as some of the selected holdings may fall in value, regardless of expectations at the time of acquisition. We may also invest in funds that hold overseas securities. The value of these investments may increase or decrease as a result of changes in currency exchange rates. Returns achieved in the past cannot be relied upon to be repeated.Your home may be at risk if you fail to maintain your mortgage interest and capital repayments or those of any loans secured upon it.

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Philip J Milton & Company Plc is entered on the FSA register (http://www.fsa.gov.uk/register) under reference: 181768.
Registered Office: Sterling House, 17 Joy Street, Barnstaple, Devon EX31 1HE
Incorporated in England number 3233275.
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