Inheritance Tax Solicitors in Devon

If you have assets approaching the threshold for Inheritance Tax, then you may wish to obtain professional advice in relation to Inheritance Tax planning. Professional advice can save much more than it costs and ensure that those closest to you benefit as fully as possible from your estate on your death.

Inheritance Tax — The Basics

  • Inheritance tax (IHT) is currently charged at 40% on the value of your estate in excess of £325,000.
  • Married couples and civil partners can transfer their unused allowances to each other on death; this effectively means that for a couple who are UK domiciled up to £650,000 can be left free of Inheritance Tax.
  • Inheritance tax is calculated on the value of the deceased's net estate, i.e. the value of everything they owned at the point of death less money owed.

With rising house prices and a freeze on the Inheritance Tax allowance, it's important to remember that Inheritance Tax isn't something that only 'wealthy' people have to pay. A house worth £325,000 already takes up half of the allowance for a married couple (the full allowance if owned by an unmarried sole owner)

Inheritance Tax – An Example

Mrs B is aged 80, widowed and living off her state and private pension income. She recently downsized and moved home. Her current house is worth £160,000 leaving her with £625,000 from her old house. Including other assets, such as cars, personal effects and bank accounts, her total estate is worth £830,000.

Even though her husband is deceased, she is still subject to the joint allowance of £650,000. Based on these figures, Mrs B has an Inheritance Tax liability of  £72,000 (£830,000 - £650,000 = £180,000 x 40% = £72,000) without even realising. She wanted to complete some renovations on her current house but did not know what to do with the remaining money or her tax issue so she spoke with us. 

We first recommended that Mrs B invested £200,000 into an approved Inheritance Tax scheme with the aim to reduce her Inheritance Tax liability by £80,000– this scheme completely removes her liability within 2 years rather than 7 years if she were to gift money.  

We then suggested that she puts £235,000 into a stocks and shares portfolio to put her money to work and potentially beat cash savings rates. We also suggested taking up the ISA allowance of £15,240 in order to improve  the income tax and capital gains tax on the investments.

It’s important to know that her estate still totals £830,200 but in 2 years time £80,000 will be outside of her estate for inheritance tax purposes.

Many people do not realise that there are solutions to tackling inheritance tax. Some do not even know they have an inheritance tax liability at all. Seeking professional advice can help put your mind at ease knowing that your money is still yours.

Whether it's Inheritance Tax planning or general Estate Preservation, there are a number of options available to you. This is just an example used to explain what we can do. Through careful planning we can help you retain the value that you've built up within your estate.

If you feel inheritance tax is an issue for you and you would like to discuss this further, please call us or send an email. This is an area of practice to which our team at SWLaw Investment & Financial Planning Ltd can contribute by working together with our Private Client team at SWLaw Solicitors Ltd.