Reduce your tax liability through inheritance tax planning
Properly organising your financial affairs can help you avoid paying unnecessary tax. There are means which can be utilised to limit your overall tax liability. Our Edinburgh tax and financial planning service can help you order your finances to reduce the amount you pay in tax.
What is inheritance tax?
Inheritance Tax is tax which is payable on an estate when someone dies. In addition, IHT is payable on certain transfers made during a person's lifetime – gifts and trusts made up to 7 years before death are liable to income tax.
Not all estates have to pay IHT. The current inheritance tax threshold for 2015/2016 is £325,000.
Usually, the executor (the person responsible for winding up the estate) pays IHT out of the deceased's estate. This requires the estate to be valued so that the total IHT liability can be assessed.
There are certain exemptions and reliefs available which can reduce the overall IHT liability. Certain gifts and legacies are exempt from IHT:
- Gifts and legacies made to your spouse or civil partner
- Gifts made to charities, whether during life or in your will
- Gifts which you make 7 years or more before your death
- Gifts which fall under the annual exemption - £3000 for the tax year 2015/2016. This allowance can be rolled over into the next year
- Gifts of less than £250