Most people make New Year’s resolutions around this time but one that should be high on the list is to get their inheritance tax (IHT) planning organised, or their loved ones could be left owing the tax-man more than expected.
The absolutley shocking number of celebrity deaths last year highlights that people can be taken much sooner than expected and if they have made no provision before they die, much of their estate could end up going to the Government.
Lets look at George Michael, who died at 53, was a good example of what to do; his will was meticulously drawn up so that his beneficiaries will pay the minimum amount of tax. However, Prince, who also died in his 50s, had made no will and it is thought likely that a huge chunk of his fortune will go to the American equivalent of HM Revenue & Customs (HMRC).
In fact, recent figures show that HMRC benefited from a record £4.7bn in IHT in the 2015-16 tax year, almost doubling its take in just seven years. This is probably because the IHT threshold has remained at £325,000 per individual since 2009 while house prices have soared, which means that many more ‘ordinary’ people are being caught in the 40 per cent tax net.
However, with planning, people can legally save their beneficiaries much more. For example, as of this tax year, IHT will be scrapped on homes of up to £1m, as long as they are left to ‘direct descendants’ and is the deceased’s main residence. This adds an extra £100,000 and will rise by £25,000 each year until it reaches £175,000 in 2020.
This means that the maximum that can be passed on tax-free for an individual from April 2017 is £425,000. For couples, the £425,000 is doubled to £850,000, as their allowance is passed on to the surviving spouse.
Other ways to mitigate loved ones’ tax bill is to give away up to £3,000 each tax year give gifts to charities or political parties. However, the best way to save every possible penny is to take professional advice. Thats where we come into place, here at Keily Legal & Wealth we can help you look after your family and make sure the best plans are in place. So if you are in Essex, Billericay, Brentwood, Shenfield, Ingatestone, Stock, Chelmsford, Basildon, Wickford, Southend, Harlow, Halstead. Colchester then contact K&sCo Estate Planning on 01277841152 or check out keily.legal for more information