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What exactly is Inheritance Tax?

 

Let’s dispel a myth immediately. You don’t have to be rich for your estate to be eligible for Inheritance Tax.

 

See for yourself what it includes:

 

The rate of Inheritance Tax is 40% for everyone and is payable on any estate amount over the "nil rate band which currently stands at £312,000 (tax years 2008/09). This is equivalent to the highest current rate for income tax. The tax is paid by those that inherit – and is deducted from the estate on death – so Inheritance Tax is relevant whether you stand to gain an inheritance or you plan to leave one.

 

Planning your Inheritance Tax.

 

Leaving an inheritance

 

You may have thought of leaving an inheritance but without some careful planning, it might be a lot less than you think. That’s because the taxman might ask your family to pay Inheritance Tax. And in addition to that, the Government’s ongoing review of the fairness of the tax system is likely to affect any inheritance planning, so you should think about making some plans soon. We can help you at least reduce the final bill.

 

Making a will

 

For a lot of people, making a will is the most obvious way to plan for the future and the fairest way to provide for loved ones.

 

Yet, it’s a fact that an amazing 70% of the UK population do not have a will. Dying without leaving a will is called “dying intestate” – which means that all your “wealth” is divided up between each surviving member of your family. If you haven’t any family or beneficiaries, it goes straight to the Crown.

 

Another drawback of intestacy is the fact that it doesn’t recognise unmarried partners, friends or charities and such like. All this heartache – and the inevitable delays – can be avoided if you make a will.

 

We may be able to help advise you on the content of your will, or alternatively recommend the services of a local solicitor. At a cost of around £80 writing a will could save your family many pounds – and much worry.

 

 

Inheritance Tax planning

 

There are a number of ways we may be able to help you to reduce any possible Inheritance Tax.

 

Holyoakes Group Ltd or its advisers might, for example, advise you to make gifts now to intended beneficiaries as these gifts are free of Inheritance Tax, providing you live for 7 years or more following the gifts. There are several other tax-efficient ways of making annual gifts, both to individuals and organisations such as charities.

 

You could then leave an amount equal to the "nil Rate band" free of Inheritance Tax to them in your will. Gifts between married couples incidentally are not subject to any Inheritance Tax.

 

You might like to think about setting up a trust. If you put part of your estate into a trust for your grandchildren, it could be decades before your cash is again under the eye of the taxman. Trusts can be complicated and we may work in conjunction with a solicitor.

 

Another option you might like to consider is an insurance policy to pay the tax bill after you die. We can compare all insurers to help find the right policy for you.

 

This summary represents our understanding of the law of England and Wales in July 2005. It does not constitute legal advice and we (Holyoakes Group Ltd) cannot accept any legal responsibility for it. In Scotland the law is different.

 

A person regulated by the Financial Services Authority has approved this information. The value of investments and the income from them can go down as well as up and you may not get back your original investment. Past performance is not necessarily a guide to future performance. Tax benefits may vary as a result of statutory change and their value will depend on individual circumstances.