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    Inheritance tax and succession planning

    Inheritance tax (IHT) is a form of death duty, the current form was introduced in 1986. When you pass away, you want to leave your loved ones as much of your wealth as possible. However, with Inheritance Tax (IHT) charged at 40% on estates worth more than £325,000, IHT can take a significant slice out of anything you wish to bequeath family and friends.

    Property, possessions, investments and savings are all regarded as assets, and all are liable to inheritance tax along with certain lifetime gifts and interests in trusts. Admittedly it is complex but careful, early planning together with the expert advice of our experienced lawyers can help lessen your liability.

    There are some reliefs and exceptions such as:

    • Surviving Spouse Exemption

    Anything spouses or registered civil partners give to each other by Will, or during their lifetime, is exempt from IHT, provided both are residents of the UK.

    • Agricultural property relief and business property relief

    Agricultural property relief may allow agriculture property, including building and houses in certain circumstances to be given away either during lifetime or by Will, free of IHT, or with 50% relief. The qualifying conditions for Agricultural property relief and business property relief are complex, if you think you have assets which might benefit from these reliefs, it is essential that you take specialist legal advice.

    • Cohabitees

    If a cohabitee inherits all of their partners estate (whether by Will or by automatic transfer of jointly held assets), IHT will be payable on everything over £325,000.

    Protecting your assets

    Trusts, restructured Wills, some lifetime gifts and deeds of variation can all help minimise the tax payable on your death, in turn maximising the amount you leave behind. Agricultural and business property relief are two of the most valuable reliefs available as they can allow assets to be passed on, free of inheritance tax.

    Inheritance Tax changes

    It’s important to note that from 6 April 2017 an additional IHT allowance was introduced where each person is allocated a family home allowance of £100,000 in addition to the existing IHT threshold, which may benefit people who wish to pass on their home to children or grandchildren. The allowance was raised again one final time in 2020, to £175,000. There are some complex rules you have to adhere to, so the property must be left to a child, grandchild, or stepchild. If you’d like us to review your Will in light of these changes, please get in touch today.

    The information provided only touches the surface of Inheritance Tax, there are many intricate rules, exemptions and caveats. If you have any questions you would like to discuss with our dedicated Wills, Trusts and Probate team please call 01603 598000 or by email probate@steeleslaw.co.uk. Appointments are available at our Diss, Norwich and London offices or home visits by appointment.