Inheritance Tax (IHT) is a Tax paid on the estate of a person who has died with assets valued at more than £325,000, including property (in the 2011 Budget, the Government confirmed this amount will remain frozen at £325,000 until at least 2014/2015).
The first £325,000 of an estate is in what is called a Nil Rate Band (a Nil Rate Band is the value of an estate not subject to Inheritance Tax) however anything above the £325,000 threshold is taxed at a rate of 40%.
With the increasing value of property, more and more people are finding themselves unwittingly above this £325,000 threshold and are placing themselves in a situation where part of their estate may have to be sold, or payment arrangements made, to settle Inheritance Tax bills on a death.
It is estimated that Inheritance Tax raised £2.7 billion for the Government in 2010/2011 and many people just accept it has to be paid, wrongly assuming there is nothing that can be done to mitigate it, but that is not the case; there may be several steps that could potentially reduce exposure to Inheritance Tax including writing a will, utilising tax efficient gifts and the use of trusts.
Trusts are not just for the very wealthy, there are several different types of trust that could be structured to best suit your personal needs. Trusts are not for everyone; for more information contact Fogwill and Jones and our knowledgeable team will be able to help you select the best option for your individual circumstances.
Note: The Financial Conduct Authority (FCA) does not regulate Wills, Trusts or Tax Advice.