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News - 7 April 2014

Inheritance tax: What you need to know for 2014/15

Inheritance Tax is something that no one really likes to think about. But failing to plan ahead can significantly reduce the amount you are able to pass onto your beneficiaries.

Inheritance Tax (IHT) is calculated on your entire estate at the time of your death. This includes money you have in the bank and investments, the value of your home, plus any other property or businesses you own. Any debts you have are then deducted from the total value of your estate.

Stuart Coleman, Manager of the Tax Department of ABDS comments:
“The tax-free allowance is now £325,000, IHT is levelled at 40% on any amount over this figure, and so, with the price of property at its current level, many of us should start to undertake tax planning in this area as soon as possible.”

There are certain measures we can take to reduce the liability.

Anything you leave to your spouse or civil partner is usually exempt from IHT and is not included in your tax free allowance.

Or, you can give away up to £3,000 a year to anyone you choose (excluding your spouse or a charity). If you haven’t used your previous year’s exemption, you can carry that forward and give away £6,000 without having to pay IHT.

Small gifts are also exempt; you can make as many gifts of £250 a year as you wish. You cannot, however, give more than one £250 gift a year to any single person.

Or another way is to help out a bride or groom with a financial gift. The amount depends upon who you are:
• up to £5,000 by a parent
• up to £2,500 by a grandparent
• up to £1,000 by any other person
 
You can also pass on assets to future generations. Stuart continues:
“If you gift shares or artwork to your descendants during your life then they will be considered to be Potentially Exempt Transfers. This means that the assets will be considered to be part of your estate for IHT purposes for seven years after the date of the transfer. If you were to die before that date, then the value of the assets would be included in your estate for tax purposes, but a sliding scale would be applied which will reduce the tax liability if the transfer occurred more than three years prior to the date of death. If you live for at least seven years after making the gift, and do not retain a benefit from the gift, it will not be subject to IHT.”

Gifts of certain business properties and assets, and of agricultural properties attract 100% or 50% relief from IHT.

As with any tax or tax planning, IHT can be complicated. If you are in any doubt about your position, then you should seek professional advice. Call the ABDS Tax Department and discuss how we can assist you in all of your taxation planning.

ABDS Chartered Certified Accountants of Southampton.
Tel: 023 8083 6900  E-mail: abds@netaccountants.net

Brilliant with numbers   
Great with people  
Clear and precise with advice
Timely and cost effective 
In touch with issues that face our clients
Mindful of our client’s long term strategic goals

Helping Your Business is Our Business

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