Inheritance Tax Planning

The current tax year comes to an end in a little over one months time.  Don't overlook some simple planning points on Inheritance Tax.

Basically the 7 year gifts rule applies, where any gifts made fall completely out of Inheritance Tax charge after that time has passed.

Put simply, if your estate would have been worth £425,000 today had you not gifted £100,000 7 years ago, then instead of being liable for a £40,0000 IHT charge, the whole estate now worth £325,000 is tax free.

If you have the ability to make gifts and your estate is likely to exceed £325,000, then it is always worth considering making £3,000 worth of gifts each tax year which are tax free.

Assuming that a married couple are able, and of course wish to, use the annual exemption, it is worth remembering that they each have £3,000 to utilise which can save £2,400 per annum in potential IHT.

There are also separate small gift exemptions of up to £250 per recipient and gifts upon marriage of up to £5,000.

Finally, always keep a note of any gifts and preferably retain it with your copy Will.  Oh you haven't made a Will yet?  Memo to self then - make arrangements to have one drawn up.