Inheritance Tax* is levied against any assets you may want to leave to your beneficiaries over and above the Nil Rate Band threshold. At present the threshold is £325,000 for 2018/19 tax year (https://www.gov.uk/inheritance-tax). The existing £325,000 nil-rate band will remain frozen until at least the end of 2020/21. The effective rate of tax is potentially 40% for any assets you may have over this level. Without the correct planning it can mean a large reduction in the value of assets being passed on to future generations. Additionally, the Residential Nil Rate Band (RNRB) currently stands at £125,000 per person and will rise to £175,000 by the 2020/21 tax year ().
There are legitimate plans and trusts that can be used to reduce the impact of Inheritance Tax on your estate. The use of trusts has been successful in Scotland for a number of generations and continue to be a useful tool in ensuring that assets can be passed to your chosen beneficiaries.
Estate planning is a complex area that needs to be dealt with carefully. The legislation involved in maintaining Inheritance Tax is ever changing and can also be applied retrospectively. Clearly it is important to receive advice on a regular basis to ensure that you are making use of the potential exemptions or allowances that are available to you and your family.
* Tax planning is not regulated by the Financial Conduct Authority. HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.