Search
Inheritance Tax Planning Advice

Inheritance Tax Planning Advice

Understanding Inheritance Tax – Protecting Your Legacy

Many of our clients worry that their loved ones will be burdened with a substantial tax bill when they inherit their hard-earned wealth. After a lifetime of work and paying taxes, they understandably seek ways to minimise the impact of Inheritance Tax (IHT) on their intended legacy. Harpur Wealth Management understands this concern. Our expertise in providing inheritance tax planning advice and estate planning strategies helps clients in Bedford and beyond reduce their potential tax burden.

 

Inheritance tax is a tax levied on the estate (property, money, and possessions) of someone who has died. The amount payable depends on the estate’s value and who inherits it.

Who Pays Inheritance Tax?

UK Inheritance Tax (IHT) can be a complex issue, so it’s important to understand the basics of who pays and how it’s calculated.

 

  • The Estate Pays. Generally, IHT is paid by the estate of the person who has died. The person responsible for handling the estate (the executor or administrator) arranges for the payment of IHT.
  • Thresholds Matter. The current IHT threshold is £325,000. If the estate’s value exceeds this amount, IHT is typically due at a rate of 40% on the portion above the threshold.
  • Example. If an estate is worth £500,000, the first £325,000 is tax-free. The remaining £175,000 is taxable at 40%, resulting in an IHT liability of £70,000.
  • Time to Pay. Executors or administrators usually have six months from the date of death to pay IHT. Failure to meet this deadline will result in HMRC charging interest. Instalment payment options may be available in certain circumstances.

Important Notes:

 

  • Inheritance Tax is currently frozen in the UK until 2028. However, IHT thresholds are subject to change. Always verify the most up-to-date figures with official sources – or professional advisors.
  • In some cases, the recipients of gifts made within 7 years of someone’s death may be liable for IHT on those gifts.

Inheritance Tax Planning Strategies

Inheritance Tax Planning Strategies

Proactive planning can significantly reduce the potential IHT burden on your estate. Here are some key strategies to consider:

 

1. Spousal Exemption and Transferable Nil-Rate Band

  • Married couples and civil partners benefit from the “spousal exemption.” This allows unlimited assets to be transferred between spouses tax-free during their lifetime and upon death.

  • Upon the death of one spouse, any unused portion of their nil-rate band (£325,000) can be transferred to the surviving spouse, effectively doubling the tax-free allowance on their future estate.

2. Lifetime Gifting

Certain gifts made during your lifetime may be exempt from IHT:

 

  • Small Gifts. Up to £250 per person per year.
  • Gifts from Income. Regular gifts out of surplus income, provided they don’t impact your living standard.
  • Wedding/Civil Partnership Gifts. Limits vary depending on your relationship to the couple.
  • The 7-Year Rule. If you survive for at least seven years after making a larger gift (potentially a large sum of money or property), it usually falls outside of your estate for IHT calculation.

3. Using Trusts

Trusts offer flexibility and control over assets, potentially mitigating IHT:

 

  • Different trusts suit different circumstances (e.g., discretionary trusts, bare trusts, interest in possession trusts).
  • Seek specialist wealth management advice to understand the complexities and benefits of trusts for your situation.

4. Residence Nil-Rate Band (RNRB)

The RNRB offers an additional tax-free allowance (currently £175,000) when your main residence is passed to direct descendants (children, grandchildren, etc.).

 

5. Charitable Giving

Gifts to registered charities are fully IHT exempt. This can both benefit causes you care about and reduce your taxable estate.

 

When is a Good Time to Start Planning for Inheritance Tax?

The earlier you start planning for Inheritance Tax (IHT), the more options you have to protect your legacy. It’s understandable to want to focus on enjoying your hard-earned assets, but proactive planning brings peace of mind knowing you’re maximising what you can pass on to loved ones.

The Importance of Professional Advice

IHT rules can be complex and change over time. Harpur Wealth Management understands your desire to minimise the tax burden on your family. We offer personalised advice and tailored strategies to help you achieve this. Even if you’re still in your asset-building phase, we can create a long-term plan that makes a significant difference to your loved ones’ future inheritance.

Ready to start a conversation about protecting your legacy? Book your free consultation online or call us at 01234 924620. Let’s work together to ensure your hard work benefits your family to the fullest extent.

Disclaimer

This article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions.

 

The value of your investment can go down as well as up and you may get back less than the amount invested.

 

‘The Financial Conduct Authority does not regulate taxation advice’

Scroll to Top