Inheritance Tax
Inheritance Tax (IHT) is a combination of a gift tax and a death duty. It can apply to gifts made by an individual during his lifetime and to his estate on death. The threshold at which Inheritance Tax (IHT) becomes payable is changed annually in the Budget. The threshold for the tax year 2008/2009 is £312,000 and any estate larger than this may be subject to tax, currently 40%. While this may seem a large sum, the combination of owning a house and life assurance policies alone means that the estate of many people of quite average means may become subject to the tax.
With good planning, however, there are many ways to reduce the liability of an estate to IHT. Many pension and life assurance policies, for example, can be written in trust so that any lump sum benefits fall outwith the deceased's estate and are therefore free of IHT. Also, gifts made during a person's lifetime, provided certain conditions are met, are "potentially exempt transfers" (PETs). These gifts become actually exempt only if the donor survives for seven years, although life insurance may be available to protect the estate against the cost in the event of an early death.
There are various other exemptions that may be part of Inheritance Tax planning: The main ones are:
* Gifts (or legacies) to spouse
* Normal expenditure out of income
* £250 small gifts exemption
* Annual £3,000 exemption
* Exemption for marriage gifts
* Gifts (or legacies) to charities
50% and 100% relief from IHT is also available for both business property (business property relief) and agricultural property (agricultural property relief) where certain conditions are satisfied.
It is also useful to consider a Deed of Variation or Deed of Family Arrangement after a person's death to vary the terms of a Will in order to take advantage of available exemptions.
When you are considering your tax affairs, or those of a trust that you are setting up, you should also bear in mind Income Tax and Capital Gains Tax, (CGT), both of which are relevant during your lifetime as well as after it. Good professional advice is essential.
Contact Aberdeen Office |
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| Alan Innes | 01224 428000 |  |
| Barbara Manson | 01224 428000 | |
| W. Guy Bentinck | 01224 428000 | |
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Paul Macallan |
01467 672800 | |
Contact Huntly Office |
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| Patricia Bowie | 01466 792101 | |
Contact Keith Office |
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| Alexander Mitchell | 01542 882537 | |
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| Linda Purkis | 019755 62939 | |