Yet again the end of the tax year is nigh. With tax increases scheduled to take effect on 6 April and the chance that the budget will further restrict tax advantages, there has probably never been a time when considering your tax strategy was so important.
Here are some Inheritance Tax planning strategies you might like to consider before 5 April:
- Consider passing on an interest in your business to the next generation. Business property relief makes most of such transfers exempt from IHT.
- Use the annual gifts allowance to make gifts to family members and others.
- Set up regular payments where appropriate – if you can continue to maintain your existing standard of living after such gifts they will not be brought into your IHT account, no matter how large they are.
- If you are gifting assets, the best ones to gift out of your estate are those which you expect to increase in value
- Consider assigning life policies into trust or making them payable directly to beneficiaries.
- Consider realising capital gains before 5 April to make use of your annual exemptions.
For IHT purposes, you can gift the following annually:
- £3,000 - if you do not use the £3,000 limit in one year, you can carry forward the unused relief for one year only;
- £250 to as many different people as you like; and
- As much as you wish to gift out of your income, provided it does not affect your lifestyle.
There are special rules relating to gifts between couples who are married or in civil partnerships where one of the couple is non-domiciled in the UK for IHT: transfers between UK domiciled spouses or civil partners are exempt from IHT.
Exempt gifts will not normally count towards the 'IHT threshold' above which gifts (known as 'potentially exempt transfers') may become taxable if the donor does not survive for seven years after making the gift.