Gloucestershire IFA: Independent financial services brokers based in Cheltenham offer lifetime financial planning and wealth management

Inheritance Tax (IHT)

Benjamin Franklin was right when he said the only two certainties in life were ‘death and taxes’. And when it comes to inheritance tax, the two things collide. But why should the taxman take some of your assets when you die – especially since you have probably already paid income tax on the money earned to buy them and capital gains tax on any profits.
While it’s more difficult to eliminate completely than it used to be, there are ways to reduce the amount of inheritance tax you have to pay.

What is Inheritance tax?
Inheritance tax, or IHT as it is commonly known, is payable on everything you have of value when you die, including:

Your home
Jewellery
Savings and investments
Cars
Any other properties or land – even if they are overseas

Inheritance Tax is payable at 40% of the value of an estate over the nil rate band(s). The current (2010/11 tax year) nil-rate threshold is £325,000.

This means that tax will be payable on the amount of your estate that exceeds the nil-rate threshold. The £325,000 allowance will remain the same for 2010-2015 tax years.

For example, if you leave behind an estate worth £500,000 the tax bill will be £70,000 (40% on £175,000 – the difference between £500,000 and £325,000). However, if you are married or in a civil partnership, you may be able to leave more than this before paying tax.

Conclusion
IHT is, indeed, the easiest of taxes to mitigate but in most cases there is no overnight solution. Our view at Cheltenham IFA’s Ltd is that the best approach for most people will be a sensible combination of a number of measures. Regulation and tax laws might change and a new government might increase the IHT threshold or introduce a basic and higher rate tax system for IHT. As with every aspect of your finances, it is important to have the flexibility to change rather than putting all of your eggs in one basket.

IHT can be complicated and no one likes to think about their own mortality, so it is a subject that is easy to avoid. But a little financial planning now can mean that your family and friends get your money when you die, not the Chancellor. Making this happen calls for considerable skill and foresight - and a detailed knowledge of the tax regime. You can rely on Cheltenham IFA’s Ltd expertise in helping you to make the right choices.
We firmly believe that they only way to advise our clients effectively is by offering completely Independent Advice, either on a fee or commission basis. We are very proud of what we do and look forward to a long and mutually profitable relationship.