Inheritance Tax

Would you like HM Revenue & Customs to be the biggest single beneficiary of your estate when you die?

Sadly, without the right advice and careful financial planning, that is what could happen. Inheritance Tax (IHT) has an increasingly broad reach. The impact on a relatively modest estate can be quite dramatic, and on a large estate it could be ruinous.

The first £325,000 of an individual's estate is taxed at 0% and is therefore not liable to IHT. For married couples and registered civil partners it is currently £650,000, where the full allowance has been passed to the surviving spouse. Anything in excess of this amount is taxed at 40%.

The introduction of the Residence Nil-Rate Band is being be phased in as follows:

£100,000 for the tax year 2017/18

£125,000 for the tax year 2018/19

£150,000 for the tax year 2019/20

£175,000 for the tax year 2020/21

Thereafter it will increase in line with the Consumer Price Index. It has also been confirmed that the existing nil-rate band will remain frozen at £325,000 until the 2021/22 tax year. If the net value of the estate is £2 million or more (after deducting any liabilities, but before reliefs and exemptions such as Business Relief) then the RNRB will be tapered by £1 for every £2 above the threshold. The allowance applies to those estates that are “closely inherited” and contain a “qualifying residential interest” – this latter point means that the individual must have owned the property and have lived in it at some point. Therefore, if you give away your home to your children (including adopted, foster or stepchildren) or grandchildren, your threshold will increase to £425,000 or £850,000 for married couples and registered civil partners.

There are some options available that you can consider to help mitigate Inheritance Tax:

Have your Will* written and planned correctly to save the maximum amount of tax

Transfer assets through the prudent use of lifetime gifts

Create a tax-efficient fund to enable the beneficiaries of an estate to meet the tax liability without disturbing the family wealth. Under current IHT legislation, pensions can play a considerable role in estate planning.

Although pension death benefits are broadly exempt from IHT, if they are passed to your survivor they will form part of their estate. St. James's Place can offer solutions which allow your survivor access to your death benefits without them forming part of their estate.

We have a service, in conjunction with four leading law firms, which is designed to provide a wide range of differing legal services covering Inheritance Tax, matrimonial issues and general tax planning.

For further information, please refer to the St. James's Place Guide to Inheritance Tax, or our Inheritance Tax Calculator. Please contact us if you wish to discuss your personal situation.

The value of an investment with St. James's Place will be directly linked to the performance of the funds selected any may fall as well as rise. You may get back less than the amount invested.

The levels and bases of taxation and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

*Will writing involves the referral to a service that is separate and distinct to those offered by St. James’s Place. Wills are not regulated by the Financial Conduct Authority.