The government is under pressure to raise the inheritance tax threshold after a study completed by UHY Hacker Young showed that Britain has the second highest rate after Ireland.
Tax Not In Line With Rising House Prices
Currently, the inheritance tax threshold is £325,000, which may sound like a lot. However, this rate has not been adjusted to take into account the rising house prices, leaving families who have lost a loved one subject to a “death tax”. Any amount over the £325,000 threshold will be subject to a 40% tax. If you are married, the threshold goes up to £650,000 for a couple.
Many people have said that the high rate of tax will deter people from accumulating wealth that can be passed onto their families. This in turn could see a number of new businesses cease to exist as many start-ups are helped with their initial investment from a family inheritance.
Last week, David Cameron gave a clear sign that the inheritance tax threshold may rise in his parties next manifesto when he announced that tax “should only really be paid by the rich”.
However, people are struggling and worried about what will happen now.
The best way to approach inheritance tax planning is to address the issue sooner rather than later. It is best to establish whether any planning can be undertaken now.
How Can Independent Advice Help Me?
There are a number of ways an Independent Financial Advisor can help you to reduce the amount of tax your beneficiaries will have to pay when you pass away.
- Use exempt gifts during the tax year to reduce the value of your estate – you can discuss which option works best for you with your advisor
- Give away money as part of your annual exemption – this is currently set at £3,000 each tax year
- Make gifts in excess of the annual exemption known as potentially exempt transfers that may be outside of your estate after 7 years. You should not retain an interest in any assets given away or it would be considered a gift with reservation.
- Consider other financial solutions such as a Discounted Gift Trust or AIM portfolio
Information on inheritance tax planning is readily available from a dedicated financial services team. They will be able to provide you with information that is tailored to you and your family so that you get the best advice.
It is important that you take professional advice to ensure the planning undertaken is suitable for your financial circumstances.
James Mann, Director and Independent Financial Advisor at Simpson Millar Financial Services Ltd said, “taking independent financial advice could enable your chosen beneficiaries to benefit from your estate rather than a large amount of inheritance tax going to the Treasury”.