The demolition of Inheritance Tax (IHT) seems to be an
ongoing dispute in this country without much resolution. The nil
rate band is ever changing, whether for better or worse is
questionable.
Since the coalition of the Tories and the Lib Dems, there have
been serious discussions around the demise of IHT. However the best
that could be done is that the nil rate band is to go up
to £350,000, £25,000 more than it is this year.
Since it seems that IHT is going to stick around for
awhile, there needs to be ways of dealing with it! One rather
obvious and simple solution is to get married! Couples who are
married or are in a civil partnership are likely to avoid the huge
40% tax which comes about when your loved one dies. This is because
your spouse will generally inherit your estate, along with the nil
rate band. If the nil rate band has not been used in full the
remainder will follow over to the surviving spouse, potentially
doubling the nil rate band. This could mean that your estate could
be free from tax.
Consequences of leaving your estate your life partner: If you
are an unmarried couple and you leave your estate of £500,000 to
your life partner, you will have to pay 40% of the remaining amount
after the nil rate band has applied. This is pretty expensive!
If marriage is not on the cards, the only way to benefit from
the nil rate band would be to own assets jointly, therefore owning
the family home as joint tenants, and having a bank account in both
names. Or there could also be opportunities to give your partner
substantial gifts early in life to avoid tax. However you wish to
reduce IHT, now is the perfect time to start thinking about it.
Comments (0)