Legal advice from Ian Sydenham, Private Client Partner based at FDR Law’s office in Warrington
Q: When making a Will, should I expect advice or guidance around the impact of Inheritance Tax on my estate for my family?
A: Yes, it is very important to understand current tax rules and regulations and the effect they can have on your estate. A specialist lawyer will be able to help you prepare your Will and plan your affairs in the most efficient manner.
It is important that your Will reflects your wishes and you should not let tax planning overtake other considerations. However, Inheritance Tax can be considerable and proper planning can help you ensure that you leave more of your estate as you would like and less to the Chancellor.
Inheritance Tax is increasingly seen as an easy source of revenue for the government and recent figures have shown that they received £4.673 billion in Inheritance Tax, up from 22% on the previous year. Tax is charged at 40% after allowances so the bigger your estate, the more will potentially go to the government.
Several reliefs and allowances are available and taking advantage of these can be key to reducing your estate’s tax bill.
From April this year, a new allowance, the “Residence Nil Rate Band”, is available. This can provide an additional tax free allowance of £100,000 per person related to the value of your home. It is proposed that this allowance will increase in future tax years to a maximum of £175,000 per person.
Like the original Nil Rate Band (currently set at £325,000 per person) this new allowance can be transferred between spouses if not used on death. A married couple of civil partners can potentially benefit from a total tax free allowance of £850,000 between them, rising to a total of £1m in future years.
The mechanics of the Residence Nil Rate Band are complicated and only apply to certain estates and in particular circumstances. It is therefore especially important to ensure that your Will is written correctly to take advantage of this allowance.