Inheritance tax planning: 5 things to consider

At PKB we have many clients that ask about estate planning. ‘Is there any way I can reduce the amount of tax I’ll have to pay when I die?’ they say. We more or less give the same reply each time.

The truth is there is no quick fix when it comes to inheritance tax (IHT). It’s a complicated tax: hard to navigate for the layman and filled with caveats. That’s the bad news.

The good news is that you can make a difference to your IHT bill by:

• asking the right questions;
• taking the right approach; and
• preparing carefully.

Inheritance tax: efficiency in 5 steps

1. What are you trying to achieve?
   Before you can begin to think about IHT-reduction strategies, you need to be clear on what you’re trying to achieve. How many beneficiaries do you have and who are they? How much do you want to give them?
2. Think simple
   Many people assume that solving a complicated tax problem requires a complicated solution. While complex schemes can work wonders in certain situations, keep in mind the need for flexibility. Complex schemes can be costly to alter if personal circumstances change, so ‘think simple’ is a good general rule of thumb.
3. Be ahead of the game
   Your future heirs can benefit from early estate planning while you are alive. Any gifts you make to people will be IHT-exempt if you live for longer than 7 years after making the gift.
4. Can you afford to be risky?
   Special tax breaks can be an alluring way of reducing a hefty IHT bill. Investments in Alternative Investment Market shares for example, are exempt from IHT. But can you afford the risk? Is it worth being exposed to high-risk investments in order to reduce your IHT liability?
5. Look at the bigger picture
   It’s no good reducing your IHT liability only to land yourself with a large capital gains tax bill. Before doing anything, always step back and look at the bigger tax picture.

Talk to the experts

We have years of experience planning peoples’ estates and helping them minimise their IHT liability. Contact us on 01344 776225 or email info@pkb.co.uk to discuss planning your estate.