Early Inheritance tax planning now essential

Tax expert Bob Fraser of the Wealth adviser firm Towry says that Inheritance tax planning has become so complex that anyone wanting to minimise the amount they will be liable for needs to begin planning earlier than ever.

One tool of tax planning that Mr Fraser believes more people should take advantage of is the ability to make regular gifts out of taxed income which are immediately free from IHT, advising that "£3,000 per donor can be gifted annually, and is exempt. This is £6000 per couple, and is one of the basic IHT building blocks."

Mr Fraser believes that IHT planning has become increasingly more difficult since the 2006 budget when the ability to put large amounts of money into trusts as potentially exempt transfers was done away with. He advises that:

"Gifts into trusts, other than for disabled persons, are now limited to the nil rate band, currently £325,000, unless the settlor is happy to pay 20 per cent immediate tax on the excess.

"This means that those who wish to reduce their estate by more than this need to start IHT planning earlier. As gifts generally fall out of account after the settlor has survived seven years, this allows a progression of gifting, such that if someone starts at age 60, and lives to be 81, it is possible to use three nil rate bands - £975,000 based on £325,000."

If you live in Northern Ireland and would like to receive advice about inheritance tax planning, or on any other matter of tax such as income tax or capital gains tax, contact Wilson Nesbitt solicitors by email at estates@wilson-nesbitt.com .

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