Inheritance Tax

Inheritance Tax Allowances

The majority of UK citizens have an Inheritance Tax allowance of £325,000, as of the 20/21 tax year. They can also benefit from the additional principal private residence allowance of £175,000 per person. Married couples, or those in civil partnerships, have a joint allowance of £650,000, or £1m including principal private residence allowances.

How is Inheritance Tax Assessed?

So, what happens when you die? It depends how you hold your assets (property/cash/investments).

If your assets are held in joint names the procedure will normally follow a standard course. The assets’ value at the date of death is acquired, the deceased person’s name is removed from the accounts, and the surviving party continues with the asset. Unless your Will states differently, this is the typical situation in a marriage or civil partnership.

Assets in your sole name are covered by your Will. Your executors (the people appointed by you to administer your estate within your Will) will be responsible for dealing with the formalities. They will usually work with a solicitor to carry out your wishes, and distribute any legacies (gifts) you may wish to make on death.

If your estate is large enough to qualify for Inheritance Tax, your executors will also be responsible for ensuring HMRC is paid what is due before any legacies can be made!

How Can Harpur Wealth Help?

Many of our clients ask us how they can manage their estate effectively, in order to avoid a large inheritance tax bill for their family when they die. We can do this in two ways:

1. Structuring Your Estate. We ensure that your estate is structured in such a way that you have maximum access to funds in your lifetime, in tax-efficient wrappers.
2. Gifting Funds. Harpur Wealth’s financial advisors can help you to gift funds to your family during your lifetime – should you so wish – in order to be able to partake in their enjoyment of them.

Maximising Intergenerational Planning

Harpur Wealth would like to see the “fruits of your labour” passed to your family for future generations to use, rather than to the government via HMRC. In order to achieve our goal of intergenerational planning we can advise the beneficiaries of your estate on investing tax efficiently and become fully conversant with the options available to them to protect their estate as well. The earlier we are involved the better.

As an example, one of our directors met a family 6 years ago with a potential liability of £650,000 from the estate in IHT. Through fully legal IHT planning, the liability to the family was reduced over the period to £40,000 when the family member died – £610,000 was retained by the sons, daughters, and grandchildren rather than be paid to the Government!