Preserving Your Estate

Inheritance Tax is a tax on the value of the property, money and possessions you own when you die.

The rise in UK property values means that an increasing number of people have assets worth over the threshold of £325,000 (or £650,000 for a married couple). Depending on whether you have direct descendants and own your own property the threshold could be £500,000 (or £1,000,000 for a married couple Inheritance Tax is payable on any value of estate above the threshold at a rate of 40%.

At the 2021 tax rates, with an estate of £500,000, a single person could face a tax bill of £70,000. For a married couple with assets of £1 million the tax bill could be £140,000. Many business assets and farmland are exempt from the tax. But residential property is taxable, and ‘reservation of benefit’ rules mean it is virtually impossible to give away property and still live in it and have control over it.

While it is possible to escape the tax by giving money away and then living for seven years after the gift is made, most people can’t afford to do this because they don’t know how much capital they may need in later life, for costs such as care home fees. So, in many cases, by the time people are ready to give capital away they are unlikely to live for seven years and tax will therefore be payable.

However, the new ‘pension freedom’ rules effective from April 2015 make it possible to pass on capital via a pension fund without incurring any tax. Under the rules, Enterprise Investment Schemes count as business assets, which are also exempt from the tax. So with timely planning, you can mitigate or minimise the amount of tax owed.

We work closely with several legal firms on tax mitigation planning. The Financial Conduct Authority does not regulate tax advice.

Protecting your business

Many private businesses owners in the UK benefit from valuable tax concessions related to Capital Gains Tax and Inheritance Tax.

To make the best use of these concessions, it’s important to plan carefully for the transfer of business ownership to your children or for the sale of your business. This will also need to be integrated with your personal tax planning, for example, in relation to pension plans.

We will work with your legal and tax advisers to design the best solution for your circumstances.

If you cannot see what you are looking for, call us on 01934 511 511 or email info@fivewaysfp.co.uk