Local Life - Wigan - April 2019

62 Legal & Finance
Inheritance Tax
A Voluntary Tax?
It was the late Lord Jenkins that said, “Inheritance
Tax is a voluntary tax paid by people who distrust
their beneficiaries more than they dislike the Inland
Revenue”.
Inheritance tax can cost loved ones hundreds
of thousands in the event of your death, yet it’s
possible to legally avoid huge swathes of it, or
possibly pay none at all.
If you are single or divorced, UK legislation allows
the first £325,000 (2018/19 tax year) of your estate
to be free from Inheritance Tax, whilst if you are
married, or in a civil partnership or widowed, this
amount could rise to £650,000.
In addition to this, the residents nil rate band will
enable the nil rate band to be uplifted further if you
are living in your own property and will be passing
your estate on to direct descendants.
The main exemptions are;
• Most transfers between spouses and civil
partners
• The first £3,000 of lifetime transfers in any tax
year plus any unused balance from previous year
• Gifts of up to but not exceeding £250 p.a. to any
number of persons
• Gifts in consideration of marriage or civil
partnership of: up to £5,000 by a parent, up to
£2,500 by a grandparent or great grandparent,
or up to £1,000 by any other person
• Gifts to charities, whether made during lifetime
or on death.
Making Gifts
In most cases, any direct gift amount is a Potentially
Exempt Transfer (PET), which means that you (the
donor) need to live a further 7 years for the gift to fall
outside your estate. If you don’t, the beneficiary may
face a tax liability, which between year 3 and year
7 maybe reduced for each year you live. However,
this relief only applies to the part of a gift which is in
excess of the nil rate band (£325,000).
Trusts
This method allows for the placement of monies
into a suitable investment which is then wrapped
within a trust, of which you and other people of
your choosing can be trustees. The monies remain
in trust and all, or amounts of this, can be distributed
when you choose.
There are a wide variety of trust options available
and therefore careful consideration needs to be
given to ensure that the trust is suitable.
Is it possible to get an immediate discount to IHT
rather than wait for 7 years?
Yes, there are trusts that enable the donor to have
access to a regular, predetermined income for life.
In addition to this - based on a number of factors
- there are schemes which usually result in a saving
in Inheritance Tax from the moment the monies are
placed into the trust.
Summary
Inheritance Tax is quite a technical area and
therefore before embarking on a course of
action I would strongly recommend that you
seek professional advice. We have advisers with
advanced qualifications within the taxation and
trusts arena who if need be will be more than happy
to guide you.
David Barton APFS Cert CII (MP)
Managing Director &
Chartered Financial Planner