Lever House
61 Chorley New Road
BOLTON
BL1 4QP
Tel: 01204 365165
Fax: 01204 364509
News
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First the good news: the tax nil rate band – the amount of your estate that is inheritance tax (IHT) free – is to rise to £350,000.
Now the bad news: this change will not happen until 6 April 2010. Meanwhile the nil rate band is £300,000 in this tax year, £312,000 in 2008/09 and £325,000 in 2009/10. When Gordon Brown became Chancellor in May 1997, the nil rate band was £215,000 and the average house price was £58,196 (source: Nationwide Building Society). Average house prices have since risen by over 200% to £177,083 in March 2007 and the nil rate band has increased by 39.5%. Thus an increasing number of estates have become potentially liable to IHT. The Chancellor has regularly acted to make the tax harder to avoid. For example, in his latest Budget, as well as IHT he levied a 70% income tax charge on some death benefits under alternatively secured pensions (which allow you to draw income direct from your pension fund from age of 75). Fortunately all is not lost if you are concerned about inheritance tax on your estate (or your parents’ estate). There is a range of tried and tested methods that can help you mitigate the impact of the tax. The first and most basic is to make sure that your will is up to date. A properly drafted will could save your dependants up to £120,000. After updating wills, you should try to take maximum advantage of the various IHT exemptions. For instance, regular gifts out of income are free of inheritance tax, provided these do not reduce your standard of living. Inheritance tax planning should be integrated into your overall financial planning: there is no point in minimising inheritance tax if you suffer tax-efficient poverty as a consequence. For an initial discussion on your IHT plans, why not call us now? The FSA does not typically regulate IHT planning. |