This is a very interesting article by Rosalind Sedacca, to the point and good advice. If you need help and advice with children matters, do not hesitate to contact a member of our Family Team at Crombie Wilkinson Solicitors. By Rosalind Sedacca, CCT Being...
When someone dies, their estate may be subject to Inheritance Tax and the rate at which it is levied is 40%, one of the highest rates of taxes around.
The first £325,000 of somebody’s estate is not taxed at all and, also, generally speaking, all gifts by way of Will or Intestacy to a spouse or civil partner are exempt. Additionally, where there is a couple and the second to die dies after September 2007, the second to die can take the benefit of the unused portion of the nil rate band of the first.
These arrangements mean a lot of estates do not pay Inheritance Tax but, for those who are wealthier, the following are some popular tax avoidance measures:
1. A lifetime substantial gift made more than 7 years before death will not be clawed back into the person’s estate and taxed. It is called a Potentially Exempt Transfer (PET). Any gift made within three years of death will be deemed owned by the deceased at death and any large gifts, will between three and seven years, be taxed on a sliding scale, decreasing by 20% per annum. So, if you can afford to give away some substantial money, do so sooner rather than later.
2. The first £3000 of a lifetime transfer in any tax year plus any unused balance from the previous year is exempt. Over a number of years, therefore, you can give away an appreciable amount of money.
3. Any gift up to £250 per annum to any number of people again is not taken into account and, on marriage/civil partnership, a gift of £5000 by a parent, £2500 by a grandparent or £1000 by any other person will not count.
For those in business, if certain conditions are met there will be relief in respect of the business assets of either 50% or 100%. For those who farm there is a similar type of relief of 100%. It may be a good idea, therefore, never to retire from the business so as to preserve this protection.
And let’s not forget charities: any gift to a registered charity is exempt, a very satisfying way of helping a chosen cause.
In terms of strategy, think what you want, think what you can do and then take expert professional advice.
Please do not hesitate to contact a member of our Private Client team for help and advice.