What will your legacy look like?
Estate planning is about putting your affairs in order, to help make the lives of your loved ones easier. It can help to protect your estate for your beneficiaries and reduce the impact of Inheritance Tax (commonly called IHT for short).
IHT is something many of us don’t know enough about. Simply because we don’t think we need to.
Five key points to consider – tax year 2022/23
1)
IHT
doesn’t
just
affect
the
wealthy
Traditionally,
only the
wealthiest
in
society
were
affected
by IHT.
But
rising
property
prices
means
more and
more
people
are now
facing
it.
It
all
comes
down to
the
value of
your
overall
estate
upon
your
death.
If it’s
worth
more
than
your
personal
nil-rate
band
(NRB),
anything
above
could be
liable
to IHT
at up to
40%. (If
you’re
single
or
divorced,
the NRB
is
£325,000
and if
you’re
married,
in a
registered
civil
partnership
or
widowed,
it’s up
to
£650,000).
2)
There’s
also
the
residence
nil-rate
band
(RNRB)
–
but
not
everyone
can
benefit
If
you’re
wondering
what the
RNRB is,
this can
be used
alongside
your
usual
NRB –
and was
introduced
to help
more
people
reduce
their
IHT
liability.
Every UK
adult
has a
RNRB of
£175,000.
But the rules can be more complex than many people realise. Amongst the restrictions, you can only use this allowance if it relates to a property you have lived in, and passed to a direct descendant (such as your child or grandchild – not a friend, niece or nephew).
3)
Your
estate
isn’t
just
your
home
Your
savings
and
investments,
car and
any
rental
properties
form a
part of
your
estate.
Not
forgetting
any
jewellery
you
have,
household
furniture
or
expensive
paintings
(minus
any
liabilities,
like an
unpaid
mortgage).
After working out the value of your belongings, you may be surprised by how much your estate comes to. It could be worth a lot more than you think. It’s also important to bear in mind that these assets could increase or decrease in value in the future.
4)
Annual
revenue
is
expected
to
keep
climbing
The
latest
IHT
figures
should
be a
‘wake-up
call’
for
families
to think
carefully
about
their
tax
planning.
IHT
receipts
in the
United
Kingdom
amounted
to
approximately
£5.32
billion
in the
financial
year
2020/21[1].
5)
You
could
do
something
about
it
There
are
plenty
of
perfectly
legal
steps
you can
take to
protect
your
family’s
wealth
from the
taxman.
The IHT
solutions
include
annual
exemptions,
allowances,
direct
gifts
and
trusts.
Of course, there are many different options to choose from – so it’s important you find one that’s right for you. With this in mind, and the fact that IHT can be a complex subject, you should always obtain professional financial advice to guide you through the complexities – and help you put suitable plans in place.
Source
data:
[1]
https://www.statista.com/statistics/284325/united-kingdom-hmrc-tax-receipts-inheritance-tax/
INFORMATION IS BASED ON OUR CURRENT UNDERSTANDING OF TAXATION LEGISLATION AND REGULATIONS.
ANY LEVELS AND BASES OF, AND RELIEFS FROM, TAXATION ARE SUBJECT TO CHANGE.
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