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IHT is a tax everyone should be planning for

Inheritance tax (IHT) used to be a tax that solely impacted the wealthy, when estate tax and death duties were applied to the landowners, who were, in the main, the landed Gentry. Now IHT is relevant to almost everyone and it is a tax that is not discussed enough, mostly because it is associated with death and that can be a difficult conversation.

Many people’s first dealings with IHT is usually when a parent dies and along with all the other various forms that need to be filled in an IHT return needs to be submitted. Trying to reduce IHT retrospectively is quite hard BUT it is a tax that can be planned for and usually very efficiently.

IHT rate is 40% over the nil rate band (nrb) of £325k. The nil rate band is similar to your personal allowance, except your nrb of £325k can be reduced by gifting in the 7 years prior to death. Anything in your estate over the nil rate band is subject to 40% tax.

You could be a basic rate taxpayer all your working life and over time, you could have bought a house and seen it increase in value, now more than £325k and you are mortgage free! You may have a few investments, you may have inherited land from your parents. There is a possibility that on your death your hard-earned assets would then be charged to 40% tax.

Most people do not work hard all their life to see their assets reduced, you work hard and hope to pass the benefits of that onto the next generations. Provide a boost to children or grandchildren to get on the property ladder, provide an ongoing income to support university fees.

We don’t like difficult conversations, especially when thinking about what happens after our own or our loved one’s death. However, we risk losing the ability to provide those we leave behind with the best financial security if we don’t.

Good IHT advisers are good not only because they have the technical knowledge, but they are also good because they know how to manage sensitive conversations.

If you would like to discuss how you can make IHT planning, then please get in touch.

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