You’ve spent your working life planning for your future. You’ve carefully considered your retirement. But what about your ‘estate’ and financial security for your beneficiaries after you have passed away? Our Independent Financial Advisers here at Simpson Financial Services will give you peace of mind that your loved ones need not lose out under the financial burden of Inheritance Tax.

We will work with you, so you could enjoy the fruits of your labour with your loved ones. But also ensure that your financial planning leaves them in the best possible place to avoid huge tax payments and maximise the benefits of their inheritance.

What is Inheritance Tax?

Inheritance Tax (IHT) is calculated and payable on the value of your estate on your death.

The 2021 Budget saw the Chancellor retain the IHT ‘nil-rate band’ threshold, meaning, if the total value of your property, savings, and investments (your ‘estate’) is £325,000 or below, no IHT payment is due.

Anything over and above that threshold is required to be declared. This is the figure on which your estate Inheritance Taxpayment will be calculated, at 40% of the value.

The only deviation from this is if your main home is passed on to a child or grandchild. Or if everything above the threshold is left to a spouse, civil partner, charity, or Community Amateur Sports Club. In which case, your threshold may be increased, and is calculated dependent upon your circumstances.  If your spouse passes away before you and has not used their allowance, as everything passed directly to you, then you may be eligible to use their £325,000 as well as your own.

You will see, then, how complex Inheritance Tax can become. And can be extremely daunting without expert financial planning.

Why it is so important to plan Inheritance Tax

Forward planning of your estate will ensure that your beneficiaries and loved ones are able to benefit from a significantly reduced, or even zero, Inheritance Tax bill.  If none of those options are possible then you could establish a fund to pay the inheritance tax on your estate so that your loved ones do not have to find the money to pay it from their own means before they can apply for probate.

Dealing with this emotional turmoil and grieving process, working through your Will, and managing all that needs to be done in these circumstances is not particularly pleasant. And you will no doubt want as little additional and unnecessary stress for them as possible.

Mitigating any financial loss is one of the ways in which you can make the inevitable that little bit more bearable.

Can I reduce or avoid Inheritance Tax?

In a nutshell, yes! We know not all cases are the same, and our clients come to us seeking advice for all kinds of financial matters.

Which is why we are experts, and highly regarded, in tax efficient financial planning. Managing various ways of minimising the Inheritance Tax bill and maximising the benefits passed on to your loved ones.

Will Writing

If just the thought of discussing your death and the impact on your family puts you off writing your Will or you think your estate will be too complicated and you don’t know where to start, this is exactly why you need to speak to one of our financial planning experts.

We take away the pressure and leave you with nothing other than confidence and comfort that your estate will be divided just how you wish. And in the knowledge that your beneficiaries will only gain from your planning, financial security, and with the Inheritance Tax taken care of.

Trusts

We assess all areas in which your estate can be maximised, including setting up of a Trust. This means you are, in effect, still in control of how your finances are managed, albeit through your Trustees.

We discuss your needs, objectives and wishes for your beneficiaries and will find the most appropriate form of Trust.

Providing you live for seven years after placing assets in Trust, they are not included within the estate, and so will not form part of the calculations.

Whilst not completely exempt, assets in Trust are calculated slightly differently, on initial set up, each 10th anniversary, and then on exit. Because of this, they can get a little confusing, so our best advice is always to seek financial guidance if this is the route you wish to take.

Did you also know that life insurance can be set up in a trust, allowing immediate access to the funds for such payments as Inheritance Tax? Again, this is something we can discuss in more detail with you to ensure you are doing all you can for financial security of your beneficiaries.

Financial Gifts

Another popular method of reducing Inheritance Tax is by gifting to family and friends, whilst you are still able to see them enjoy the benefits.

If you can afford to do so, this can be in the form of annual cash, savings, property ‘gifts’, or the setting up of a Trust for longer-term financial gifting. We will ensure you utilise your allowances, such as gifting up to £3,000 per tax year, charity gifts and more.

However, we will also ensure you remain within the HMRC limits, know which gifts will become exempt over a period of time, and which might actually call for immediate IHT payments.

So do make sure to include your wishes for gifting in any Inheritance Tax discussions.

Pensions and Inheritance Tax

Although you may have considered your pension planning purely for your retirement, the passing on of a pension could also be a useful addition to your succession planning. This will be tax-free and reduce the size of your estate.

We will however also make sure you are in a financially comfortable position for your retirement as well as taking care of those around you after your passing.

Business Property Relief

If you would rather avoid financial gifts during your lifetime, this is an extremely beneficial alternative, which involves relief from IHT payments on transferring relevant business assets – a business or business interest, shares, land, machinery, property, or buildings – at a rate of 50% or 100%.

As with other suggestions included, there are exemptions and implications, which we would make you fully aware of. And this is another reason why dealing with financial experts is so vital.

How Simpson Financial Services can ease the burden of Inheritance Tax

The above examples are just a few ways in which we could help reduce the amount of Inheritance Tax your beneficiaries would have to pay on your estate, or eliminate it altogether.

You might not relish the thought just yet, but hopefully you will now appreciate how it could have a significant impact on your dependents, and why it is so important that you do not delay in getting ahead with your planning.  

The Inheritance Tax threshold will remain at this same level until at least 2026. But, by getting your affairs in order now, you are assured of resting in peace even if there are future changes.

And finally, if you have any questions about estate planning, Will writing, or would like to start discussing Inheritance Tax, to make sure your loved ones are taken care of, our specialist Independent Financial Advisers are here to take your call.