Whilst Inheritance Tax used to be a duty paid only by the wealthy, rising house prices means it now affects more people than ever before.
When you die the government assess how much you are worth. They take into account the value of your home, your business, any investments you hold, as well as any valuable items you may have too. If the total amount of your estate exceeds £325,000, then any amount above that threshold is taxed at 40%. From April 2012 the amount of tax is reduced to 36%, if you leave at least 10% of your estate to charity.
It's a tax that many people begrudge paying.
If Inheritance Tax affects you, then there are steps you can take which will reduce the amount of money your beneficiaries have to pay to the Inland Revenue.
These can include putting money into trust and gifting the money within the limits HMRC allowances. Whichever way you decide to approach estate planning, the earlier you take action the better chance you have of reducing your Inheritance Tax liability. This means more of your money is passed onto your loved ones in the future, and less is lost in tax.
The rules on Inheritance Tax can become complicated and it is important that you seek legal and financial advice in your planning.
To discuss your Inheritance Tax planning needs in detail click here to arrange an appointment with an English Mutual Financial Planner.