INHERITANCE TAX INFORMATION - GIFT TAX - DEATH DUTY

Our solicitors are able to give professional British inheritance tax (death duty) information in order that you can arrange your affairs to ensure that your assets go where you want them to go after your death rather than allowing the taxman to get his hands on them. On the first £275,000 net in an estate there is no IHT to pay however estates that exceed this amount are currently taxed at the rate of 40 percent unless the assets pass to a surviving spouse. IHT is charged based on the value of net assets, plus on certain specific lifetime gifts.

Prior to giving any British inheritance tax information a lawyer or accountant will require determination of the value of your assets. You need to calculate exactly what you are worth in order to make plans so that you can avoid IHT in plenty of time. When evaluating your assets, you must consider everything including company benefits and death in service benefits. You must consider how you want your money distributed and whether it would be beneficial to make gifts while you are still alive. There is no UK gift tax but there is the potential for tax to be paid on gifts if death occurs within set time limits after the gift is made. This is to prevent large death-bed gifts which would effectively be IHT avoidance thereby depriving the taxman of his pound of flesh.

As outlined there is currently no gift tax in place in the UK however, there is a potential future liability for inheritance tax, when gifts are made, which would be payable on death. Complicated? Read on for more British inheritance tax information. You need to make sure you live as long as you can, well at least for 7 years after making a gift if you don’t want the taxman to rifle your assets. If you don’t survive for 7 years then the gifts are treated as part of your estate and taxed accordingly if the net assets overstep the current threshold. This means that it is more sensible to give assets away to family members early to avoid tax later and so far as tax planning goes, death-bed gifts are a total waste of time.

There are also a number of other ways to avoid or decrease the liability to pay IHT. Two particular methods are annual gift allowances and tax-free marriage gifts from the parents and grandparents to a bride and groom. Married couples can save a considerable amount of tax by taking technical advantage of two nil rate inheritance tax bands. There are several other issues married couples should consider in regards to tax planning particularly relating to jointly owned assets such as the matrimonial home and other property.

A deed of variation (deed of family arrangement) is another important way of reducing tax after death. This is especially true if all of the assets have been left to the surviving spouse. The deed of variation can be used to reduce an inheritance tax bill after the death of spouse. The surviving spouse can reallocate assets in a more tax-efficient way within two years of the death of his/her spouse.