Inheritance Tax (IHT) is a levy imposed on the estate of a deceased individual. While it may seem inevitable, the question arises: Why bother planning for it?

 
Some take the stance that their wealth is theirs to enjoy, believing the next generation should fend for themselves. However, others are keen on minimizing the tax burden their heirs will face. Inheritance Tax (IHT) planning is tailored for the latter group.
inheritance-tax-1

When should one commence tax planning?

Inheritance tax planning involves an in-depth examination of an individual’s current IHT exposure. This assessment hinges on understanding the present value of assets, any gifts made within the past seven years, and the individual’s residency and domicile status. Moreover, it considers their preferences regarding asset distribution, whether articulated in a will or otherwise.

Once the current IHT liability is established, strategies to mitigate it can be explored.

How can Inheritance Tax be reduced?

Several steps can be taken to reduce IHT, including:

  • Maximizing annual exemptions like the annual gift allowance.
  • Identifying assets that can be transferred to the next generation through lifetime gifts, known as potentially exempt transfers.
  • Exploring available reliefs, such as business property relief.
  • Deliberating on charitable gifts.
A comprehensive review also encompasses other potentially triggered taxes and available reliefs to mitigate them, such as gift relief for capital gains tax purposes.

Is a Trust a Suitable Tool for Inheritance Tax Planning?

For safeguarding assets and facilitating their transfer to the next generation, a trust can be a valuable structure. At Belmont Accounting Services, we offer guidance on the tax implications of trusts. While we cannot draft trust documentation, we can collaborate with your solicitor as the planning process advances to address this aspect.