Tax and Estate Planning

Our specialist solicitors, including members of internationally recognised estate planning specialists, the Society of Trust and Estate Practitioners (STEP) can help you plan for your future, mitigate tax and structure your assets to mitigate the impact of Inheritance tax or care costs.

We are also happy to work in conjunction with accountants and financial advisors to ensure your estate planning is sound, effective and tax efficient.

WHO IS LIABLE FOR IHT?

IHT is chargeable on individuals who are domiciled in the UK, or those who have UK assets.

Individuals who are domiciled in the UK (which for IHT purposes includes those who have been resident in the UK for at least 17 out of the previous 20 tax years), are subject to IHT on their worldwide assets. From 6 April 2017, individuals who have been UK resident for more than 15 out of the last 20 tax years will be deemed to be UK domiciled for all tax purposes.

If you have lived in the UK all your life, IHT applies to your worldwide assets.

Individuals who are not domiciled in the UK are subject to IHT on their UK assets only.

WHAT IS THE RATE OF TAX?

The nil rate band is charged at 0% (see the section on the Nil Rate Band below).
The balance is charged at:
20% for lifetime gifts to companies or to relevant property trusts (with further tax due if the donor dies within seven years).
40% on estates on death.

The rate of IHT on death is reduced from 40% to 36% for individuals who leave 10% or more of their net estate to charity.

HOW DOES IHT PLANNING WORK?

An IHT liability can be reduced (sometimes to nil) by the availability and use of certain exclusions, exemptions and reliefs contained in the IHT legislation.

An “exclusion” relates to certain assets which are specifically excluded from IHT. An “exemption” exempts gifts (of any assets) made to certain persons, provided the conditions are met. A “relief” either wholly or partially reduces the amount of IHT payable in respect of certain assets, provided the conditions for the relief are met.

By looking at your circumstances, your future plans and extent you wish to mitigate tax, we can advise you of options and strategies to consider. This is often working in conjunction with your financial adviser or accountant, or if required we can introduce you to our trusted network of partners.

WHAT IS THE NIL RATE BAND?

The nil rate band is the amount which is chargeable to IHT at 0%. The basic nil rate band is currently £325,000. Individuals who die on or after 6 April 2017 will be entitled to an extra Residential Nil Rate Band if they leave their family home to children or grandchildren.

If you are married, your surviving spouse, or civil partner can “inherit” the unused portion of your nil rate band or extra nil rate band. When a claim is made, this increases the surviving spouse’s or civil partner’s nil rate band on a percentage basis (and not simply by the amount of your unused nil rate band).

THE RESIDENCE NIL RATE BAND

The nil rate band (£325,000 in the tax year 2018/19) is the amount which is chargeable to IHT at the rate of 0%. From 6 April 2017, an additional residence nil rate band (RNRB) applies so that less IHT may be paid when the family home is left to children or grandchildren or limited other people.

Your estate will benefit from the RNRB, in addition to the main nil rate band, if you leave your interest in the family home to direct descendants such as children or grandchildren (including stepchildren or foster children) as well as a minority of other ”qualifying beneficiaries”. The RNRB could help those who inherit your assets make an additional IHT saving by increasing the part of your estate that is taxed at 0% rather than 40%.

The RNRB can be claimed if all of the following apply to you:

You die on or after 6 April 2017.
You leave an estate valued at less than an upper limit, which is initially £2 million but is set to rise with inflation from 6 April 2021. The RNRB is tapered down for estates worth more than this.
You leave your home to qualifying beneficiaries. Some trusts for these beneficiaries also qualify.

If leave your home to your spouse or civil partner rather than children or grandchildren, the RNRB is not necessarily wasted as it can be carried forward (together with any unused main nil rate band) for the benefit of your surviving spouse or civil partner.

The table below shows the RNRB levels that the government has announced (which can be added to the main nil rate band to increase the amount of assets in your estate that will be taxed at 0%). The combined nil rate bands could be worth as much as £1 million by 2021. These figures may change so it is important to check from time to time.

Tax year	RNRB	Main nil rate band	Total Available
2018-19	£125,000	£325,000	£450,000
2019-20	£150,000	£325,000	£475,000
2020-21	£175,000	£325,000	£500,000