IHT: Planning early pays off
An extremely controversial, yet lucrative source of income for the Treasury, inheritance tax has been in the news again highlighting the contrast around the country.
An article from the BBC has named Guildford in Surrey as “Inheritance Tax Capital” of the UK. This is due to the town attracting a prosperous commuter belt, where as many as 658 families were subject to the tax in 2015/16. This equated to an average of £231,000 per person and was the highest tax bill than anywhere else in the country. Guildford was closely followed by Chelsea, Wimbledon, Kensington and Hammersmith.
This compares to just 31 estates in Wigan, Greater Manchester, which were sufficiently valuable to be liable for the tax.
How does it work?
In order to pay Inheritance Tax (IHT) families have to pass on an estate worth at least £325,000. Married or civil partners who pass on their allowance are not liable unless their estate is worth £650,000 or more. IHT is charged at 40% of all assets over that amount and includes any valuable possessions, property or cash investments.
However, with property prices increasing all the time, many campaigners have tried to fight the £325,000 allowance, which has been frozen since 2009. House prices have remained steady across the rest of the country, property prices have soared in London and the South East.
In 2017, the Government introduced a nil rate band for residences (RNRB). This allows a valuable tax break for those looking to pass property on to their direct descendants.
Planning early pays off
Many people are now looking to seek professional advice and plan early to help mitigate any unplanned tax bills. However, IHT is an extremely complex area of law and it is recommended you plan as early as possible for a tax efficient will or trust.
With careful planning, you could protect your wealth and maximise any reliefs that could be available to reduce the tax burden on your family.
Here at Downs Solicitors, we can provide you with all the right advice relating to your property and trusts in the UK and overseas. Plus, we have offices around London and Surrey, including Guildford – so if you are affected by the IHT hotspots, contact us to see how we can help.