Planning for Inheritance Tax
Taxing the family
If you are UK domiciled you are subject to Inheritance Tax (IHT) on your worldwide assets upon your death. Even if you are not UK domiciled for other tax purposes, you will be deemed UK domiciled in the UK if you have been tax resident in the UK for some part of 17 out of the last 20 tax years.
Leaving the UK, for example to retire abroad does not mean that you suddenly become non-UK domiciled and are outside the UK IHT regime. You must live outside the UK for over three tax years before losing a deemed domicile status. If you are non UK domiciled only your UK sited assets are subject to IHT, though foreign assets may be taxable in other countries depending upon where they are situated.
Tenon Inheritance Tax Top Tips
- > 1. Make a plan
Think about where you want your money to go and why. You might not want to give away assets too quickly. - > 2. Write a will
A will makes your wishes concrete, eases administration and clarifies who should get what. It will stop any assets being divided under the rules of intestacy, where even spouses are not guaranteed to inherit everything. It can also be the first step to reducing an inheritance tax bill. - > 3. Minimise your estate
New life insurance plans should be written under trust but many existing life policies can be transferred into a trust. If your employer pays a death benefit, complete a nomination form to make sure that any money goes directly to the person you choose and not into your estate. - > 4. Get married
Anything you pass on to a spouse is free of inheritance tax. The same concession will apply to same gender couples who register under civil partnership laws. - > 5. Think about your home
Your home is probably your biggest asset but there are ways to keep down the size of your estate. - > 6. Investments
Some investments are given favourable treatment for inheritance tax purposes, including shares in an unquoted business, woodlands, farms and farmland. Shares on AIM also qualify for relief. - > 7. Explore trusts
In addition to Will trusts, several others can help in estate planning. - > 8. Consider insurance
Another option is to estimate your IHT bill then arrange insurance to cover part or all of it. - > 9. Use annual allowances
Giving away money will reduce your estate, but will not cut the tax liability immediately. You have to survive for seven years for most gifts to escape the IHT net. - > 10. Speak to a Tenon Tax Adviser
With expert advice you could reduce your IHT liability.