With another tax year soon to be coming to a close, now is the time to review your estate Inheritance Tax (IHT) planning strategy.

With the nil rate band (NRB) set to be fixed at £325,000 until at least 2021, it is worth ensuring that, where possible, you make use of your annual allowances. You should also see that you have taken appropriate action to reduce the value of your estate that would be subject to IHT in the event of your death.

Each year every individual has a £3,000 annual exemption, which is the total amount of cash that they can pass onto another individual without affecting the NRB allowance available to their estate on their death.

This allowance can be carried forward to the next tax year to the extent that it is unused. However, this is limited to one tax year only, so if you had not made such a gift in the previous tax year you could now gift £6,000 without affecting your nil rate band allowance. Once the clock turns midnight on 5th April, a new tax year will start, permitting you to make another £3,000 gift. Therefore provided the above were followed, £9,000 in total could be gifted between now and 5th April 2019 without impacting on your estate's NRB and making a potential tax saving to IHT of £3,600.

Should you make gifts in excess of this sum, then unless it qualifies as an exempted gift, you will need to survive 7 years for the value to fall outside of your estate for IHT purposes. A common misconception is that gifts over the annual exemption, but under the current nil rate band would in any event taper over the course of the 7 years. Unfortunately this is not the case, and the availability of taper relief to apply to the value of tax on the gifts is only relevant if you make gifts over the course of the 7 year period which exceed the NRB.

In addition to the exempted gifts, there is another relief available, which if applicable means that you can give in excess of the £3,000 sum, and this gift will not impact on your estate's NRB.

If you are fortunate to regularly receive income in excess of your living expenses, then you can make use of the 'Gifts out of Excess Income' exemption. In brief, where an individual can demonstrate that they receive more income than is required to maintain their standard of living, the excess, irrespective of the amount this may be, can be given away without being subject to the 7 year rule. However, there are requirements for HMRC to accept this claim; the individual should not need to have recourse to capital to maintain their usual standard of living and there should be evidence of at least an intention for the gift to be 'regular'.

If you wish to make use of this exemption, now is the time to review your finances and make the gifts. It is also worth keeping accurate records of your income and expenditure together with the gifts that you are making in the tax year. This will make the position for those administering your estate easier and will create a clear and unambiguous record of your income and outgoings (including gifts).

Finally, it is also worth reviewing any pension policy trusts that you may have created pre 2015 and looking at whether your life insurance policy would pay to your estate. I If you haven't reviewed your Will in the last 5 years, or considered a Lasting Power of Attorney, then now is also a good time to do so as part of a general review of your affairs. Our Trusts & Estates team would be pleased to help you, and can meet with you at any of our firm's offices.