IHT Planning

Inheritance Tax Planning Advice

Inheritance Tax has famously been described as a voluntary tax paid by those who distrust their heirs more than they dislike HMRC. There is some truth in that. With proper planning at different stages of life, it may be possible to reduce significantly the IHT ultimately payable on death.

Our inheritance tax planning advice is focused on the long-term management of your estate and identifying opportunities to reduce future IHT exposure.

A long-term approach to IHT planning

Gifts made during your lifetime can still affect the IHT position if you die within seven years. Transferring assets can also have other tax consequences. For that reason, IHT planning is often about having a long-term strategy and recognising opportunities to reduce the eventual liability.

Whilst we can provide advice on end-of-life IHT, based on existing Wills and structures, IHT is best considered as part of wider tax planning.

For many clients, this means considering inheritance tax well before it becomes an immediate concern. We are also often approached by the next generation, who are concerned that their parents have left inheritance tax planning too late or have not considered it at all.

When to consider inheritance tax planning

For example, if you have investment funds available from a separate sale, or have recently inherited funds, there may be little or no gain attached to those funds at that point. This can be an ideal time to consider whether they should be invested through a flexible, IHT-efficient structure. Waiting until the investments have increased substantially in value is likely to introduce a tax cost to later planning.

This can make the point at which you are deciding how to invest capital particularly important for IHT planning. Property can require especially early consideration, as restructuring assets after they have been held and increased in value may be more difficult. Part of the value of planning early is knowing when future opportunities arise and when a decision about an asset could affect the eventual IHT position.

What is the aim of IHT Planning?

The ideal aim of IHT planning is to maintain a chargeable IHT estate that falls within the taxpayer’s Nil-rate bands (NRBs) so that no IHT arises on their estate, whilst ensuring adequate lifestyle funding is retained. This can be through lifetime gifts, maximising the use of available exemptions and by investing through IHT-efficient structures.

The appropriate strategy will depend on the composition of the estate and the client’s own requirements during their lifetime.

Inheritance tax planning later in life

We can also advise where inheritance tax planning has been left until later in life. At that stage, the work may involve reviewing existing Wills and structures and identifying the consequences or limitations of planning already undertaken. At this stage, good advice can be as much about identifying the pitfalls of proposed planning as finding new opportunities.

Starting earlier generally provides more opportunity to build inheritance tax considerations into future financial decisions.

Speak to an inheritance tax specialist

If inheritance tax is likely to be a significant concern for your family, we can review the current position and help develop a longer-term IHT planning strategy.