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Tax

Inheritance Tax

Our Inheritance Tax solicitors can help you plan your estate’s inheritance tax so your loved ones can make the most of your assets, wealth, and property.

Sophisticated planning and expert legal advice are essential to make sure your estate is inheritance tax (IHT) efficient – particularly if you own businesses or foreign assets.

We can advise you on how to take advantage of the complex web of IHT reliefs and exemptions and maximise the inheritance you pass on to the next generation.

Our dedicated team of lawyers are recognised experts in all aspects of inheritance tax, including:

  • Inheritance tax planning and estate planning
  • Transferring tax-free allowances to wives, husbands and civil partners
  • Non-domicile and international inheritance tax
  • Filing inheritance tax returns
  • Will drafting
  • Lifetime gifts and potentially exempt transfers (PETs)
  • Charity donations
  • Trusts.

Inheritance tax is a dynamic area of law where change is constant and ideas develop fast. Having a plan in place isn’t enough – you’ve got to make sure it’s up-to-date.

Our solicitors and tax advisors are highly respected experts in the field of IHT law. We’ll use cutting-edge strategies to ensure that your IHT plan stays effective and compliant.

IHT law often overlaps with other legal areas such as probate, trusts, family law, and property. As part of one of the country’s leading private client law firms, we have specialists in all these areas and more, meaning you’ll get quick, effective advice for every eventuality.

With offices in major cities around the UK and a worldwide network of professional contacts, we can help wherever you and your assets are based. Call us on 0370 1500 100 to speak to a member of our team today.

Creating or reorganizing Wills and trusts to take advantage of IHT
Experts in planning to reduce IHT on lifetime gifts, estates and trusts
Work with financial planners to give you the best IHT solutions
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More Information - Inheritance Tax
    • What Is Inheritance Tax (IHT)?
    • Inheritance Tax (IHT) is a tax on the value of the assets that you own – your estate - when you die.

      If you have a life interest or right to income in certain types of trusts, IHT can sometimes apply to these trusts’ assets as well. It can also be charged on any gifts to a trust that you’ve made in your lifetime.

      IHT is taken from your estate before any assets are distributed between your successors. In some cases, certain assets might have to be sold to pay the tax.

      There are a number of reliefs and allowances that reduce the amount of IHT that your estate must pay. For example, assets that you leave to a spouse or partner are exempt from IHT.

      We can help you make the most of these reliefs and allowances and ensure that your successors can benefit from as much of your estate as possible. Contact us online to find out more.

    • What Is The UK Inheritance Tax Allowance?
    • The first £325,000 of your estate is passed on tax-free. This allowance is called the Nil Rate Band (NRB).

      If your estate is worth less than this, it pays no IHT at all. This will change if you make any substantial lifetime gifts within 7 years before your death or reserved a benefit in the asset gifted.

      Reserving a benefit is when you gift someone property ‘on paper’, but don’t let them take full possession of it or use of it straight away. For example, if you gift someone your house but continue living in it yourself.

      If your estate is worth more, it only pays IHT on the excess. For example, if your estate is worth £400,000, IHT typically applies to the extra £75,000.

      The Nil Rate Band will stay at £325,000 until at least 2021.

      Another allowance is called the Residence Nil Rate Band (RNRB). This applies if your estate includes a home and it is passed on to direct descendants such as children, grandchildren, spouses, and civil partners.

      In the 2018/19 tax year, this allowance means that you can pass on another £125,000 tax-free for a total of £450,000.

      The RNRB will increase to £150,000 in the 19/20 tax year and then £175,000 in 20/21.

    • Can I Transfer My Tax-Free Allowance to My Spouse Or Partner?
    • Yes - your spouse or partner’s estate can use any portion of your Nil Rate Band allowance that your own estate doesn’t use.

      You pay no IHT on assets left to spouses or partners so none of your tax-free allowance is used if you leave everything to them. This means that you can transfer your entire NRB allowance and your spouse or partner’s estate will have a total tax-free allowance of £650,000.

      Alternatively, you might leave £100,000 to your children and the rest to your spouse. The NRB allowance applies to your children’s £100,000 and the remaining £225,000 of your allowance is unused. You could transfer the remaining allowance to your spouse so their estate has a tax-free total of £550,000.

      The Residential Nil Rate Band allowance can also be transferred in certain specific situations. This could potentially mean a total tax-free allowance of £900,000 for the surviving spouse, increasing to £1,000,000 in 2020/21.

      Using trusts in Wills for spouses can also be important for Inheritance Tax planning. Trusts can make use of tax allowances while keeping your surviving spouse’s future secure.

    • How Will Inheritance Tax Affect My Business?
    • If your estate includes a business or business assets, it may qualify for Business Property Relief (BPR).

      With BPR, your estate pays no IHT on businesses, interests in businesses, or shares in unlisted companies. It also reduced IHT to 50% on certain other business assets.

      If you are a farmer or agricultural landowner, you can also pass on some agricultural land and buildings free of IHT through Agricultural Property Relief (APR). In many cases, you can also benefit from BPR on other aspects of your business.

      There are many complicated rules and exceptions involved with applying inheritance tax to businesses particularly when both BPR and APR are involved, including the potential use of trusts. It’s vital to secure legal advice to make sure that your estate is planned correctly to take advantage of the reliefs available.

      Call 0370 1500 100 to find out more about how we can help you pass business assets on to the next generation.

    • I’m Not A UK Citizen – Do I Still Have To Pay UK Inheritance Tax?
    • UK tax rules are based on your ‘domicile’ rather than your nationality. Your domicile is the place where the tax authorities consider your permanent home to be.

      This means that your estate may have to pay UK inheritance tax if you have lived in the UK for several years – even if you are officially still a foreign citizen.

      The rules surrounding tax domiciles are very complicated and it’s important to have specialist advice to avoid getting caught out. See our Tax Residence page for more information.

    • Does Inheritance Tax Apply To Foreign Assets?
    • If your permanent home or ‘domicile’ is in England or Wales, your estate must pay inheritance tax based on the value of all your worldwide assets – including any assets that you own abroad.

      Foreign assets are only excluded from IHT calculations if your domicile is abroad e.g. if you are a ‘non-dom’. If you have been living in the UK for a number of years you may be treated as “deemed domiciled” for IHT.

      Read more about the effects of domicile and residence on your taxes on our Tax Residence page.

Irwin Mitchell are a very professional, trustworthy and straightforward company to deal with. I would recommend them to anyone."

Frank Clayton, client

Frequently Asked Questions

How Is Inheritance Tax Paid?

When you die, your estate will be managed by someone called the executor or administrator. This person (or persons) is responsible for paying your estate’s inheritance tax.

They must pay inheritance tax before passing on any of your assets to the people chosen in your will.

In some cases, your estate might need to sell some assets in order to pay its IHT. However, the share of tax due on certain assets – such as property - can be paid in instalments instead. This can help your successors keep a family home if your estate can’t afford to pay the tax as a lump sum. In some cases it may be possible to arrange for funds or assets held in the estate to be used to pay all or some of the IHT bill.

IHT is also sometimes payable on certain trusts (known as relevant property trusts) at ten-yearly intervals or whenever capital is taken out of the trust.

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Are Gifts Affected by Inheritance Tax?

There are a number of rules and allowances affecting gifts and inheritance tax, including:

  • Your Gift Allowance - you can give away cash or assets worth £3,000 every tax year without incurring inheritance tax
  • Potentially Exempt Transfers (PET) - IHT doesn’t apply to gifts worth over £3,000 if you live for another seven years after making the gift. If a gift is made into a trust that will usually be a different form of gift on which some IHT might be payable immediately.
  • Small gifts of up to £250 per person, per tax year are exempt from IHT
  • Gifts to financial dependents – these are also exempt from IHT
  • Wedding gifts that meet certain criteria are IHT-free
  • Regular gifts from income – regular gifts that don’t affect your standard of living can be IHT-free provided you comply with some detailed rules in practice.

Gifts will not normally be tax-effective if they involve retaining a benefit through continuing income or use of capital. The “reservation of benefit” rules can be complex but our solicitors will give you advice on how to plan a way forward.

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