What happens if I want to protect my assets from IHT?

In the UK, individuals and families who wish to pass on their legacy need to tread carefully in order to ensure they are not hit with a hefty Inheritance Tax (IHT) bill.

IHT is levied at a rate of 40 per cent of an estate’s total value on all estates valued at £325,000 or more. This £325,000 threshold is known as the ‘nil rate band’ and, despite ever-rising wealth across the country, has remained frozen at this amount for several years.

Reports continue to emerge suggesting that more and more middle-class families are falling foul of the so-called ‘death tax’, which is why it is now more important than ever to plan ahead by seeking specialist tax planning advice.

Individuals and families who want to explore ways of mitigating their IHT liability should investigate all of their options in order to determine which methods of tax planning will benefit them most.

New 2020 IHT relief – up to £1 million could now be exempt

From April 2020, couples will receive a welcome additional exemption from Inheritance Tax.

In addition to the £325,000 tax-free allowance – known as the nil-rate band (NRB) – which everyone is entitled to, couples who are married or in a civil partnership receive an additional entitlement.

Introduced back in 2017, the ‘Residential Nil Rate Band (RNRB), allows couples to leave their home to certain family members, with a portion of the property’s value being IHT-free.

In 2019, this transferable allowance was £150,000 but from April 2020 the RNRB tax relief rises to £175,000.

This means that a couple will soon have a combined IHT allowance of £1million – £325,000 NRB each, plus £175,000 RNRB per person.

A single person will be able to leave an estate of up to £500,000, before the 40 percent IHT tax rate kicks in.

Any estates valued at over £2 million remain subject to a tax band of £1 for each £2 over the threshold, in effect meaning that the Residence Nil Rate Band is not available for estates over £2.35 million.

Despite the increase in the RNRB exemption allowance, the rise in property values may still leave many people liable for IHT.

At RDP Newmans we are able to explain, in no-nonsense terms, how IHT issues might impact on your estate and help you sort out your tax affairs.

We will work on your behalf to ensure that your tax liability is minimised so that more of your hard-earned money stays with you, your business and, eventually, your loved ones. To find out how our team can help, get in touch today.

Posted in Blog.