How to pass on maximum wealth to your next generation.
Are you aware that, even as a non-UK resident, you are still potentially liable for Inheritance Tax in the event of your death?
Inheritance Tax is based on your domicile status and not your residency status so if you have not taken explicit steps to change your domicile, you will still be liable.
There are many complicated rules that stipulate how much IHT is payable on an estate but, with some basic planning, you can drastically reduce the tax your loved ones will have to pay.
Are you also aware that HMRC will demand 40% of the value of your estate over £325,000 before they will allow your legacy to be transferred to your chosen beneficiaries?
Even if you pass away abroad, the local government will advise the British authorities of the death and it will therefore still fall under the UK IHT system. More and more UK domicile individuals find themselves liable for IHT as property prices grow and their overall net worth breaches the limits which have remained flat since 2009 whilst UK property prices have risen over 40% in the same period. This information is very vital for the citizens of UK(United Kingdom) and Ireland which can be effected by Inheritance tax if not planned carefully.
Inheritance tax punishes years of hard work and robs families of part of their heritage by imposing a huge penalty on inheritance after death - a tax on money that has already been taxed.
- Mike Fitzpatrick
There are three main areas you can look at today to get started.
Many people start giving away their assets while they are still alive to avoid hefty IHT bills. This is a good strategy but there are a number of things to remember: The annual gift allowance is £3,000. You can gift £250 or less to any number of people without having to pay IHT and it doesn’t count towards the above gift allowance. You can make life-time gifts of any size if you wish but if you pass away within seven years of gifting, your estate will be liable for IHT (on a sliding scale).
The nil rate band (NRB) per person is £325,000. From April 2017 there’s also an additional tax-free allowance of £100,000 if your estate includes a main residence. This means if you are married, you can pass on up to £850,000 without being liable for 40% IHT.
Finally, you can donate a portion of your estate to a good cause that will result in a reduction on the tax percentage. If you donate 10% of your estate to a registered charity, it will reduce the tax rate from 40% to 36%.
Inheritance Tax is avoidable with careful tax planning by a qualified expert. At Credence, we have Chartered Financial Planning Managers who will be happy to discuss this with you and make some personal recommendations to fit your individual circumstances.
Click learn more to get more information about inheritance tax for citizens of UK(United Kingdom) and Ireland.
I have issues with inheritance tax, particularly coming from a migrant family. My dad has worked incredibly hard all his life, so it seems odd to me that someone who has gone through that experience has managed to save then gets taxed for dying.
- Sanjeev Bhaskar
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