TAX YEAR END PLANNING PART 3

TODAY’S BLOG

TAX YEAR END PLANNING PART 3 – IHT

Inheritance Tax is one of the most unpopular taxes, yet it is a tax that you will not pay – your estate might. There are various solutions to reducing or avoiding inheritance tax – talk to me if you want to know more about them. However, each tax year you get some basic allowances that you can use to pass on wealth without any inheritance tax.

  • ANNUAL EXEMPTION

Each tax year you can give away £3,000 free of IHT. If you do not use all of the exemption in one year, you can carry forward the unused element, but only to the following tax year, when it can only be used after that year’s exemption has been exhausted.

  • SMALL GIFTS EXEMPTION

You can give up to £250 outright per tax year free of IHT to as many people as you wish, so long as they do not receive any part of the £3,000 exemption.

  • NORMAL EXPENDITURE EXEMPTION

The normal expenditure exemption is potentially the most valuable of the yearly IHT exemptions and the one most likely to be reformed. Currently, any gift is exempt from IHT provided that:

    • you make it regularly;
    • it is made out of income (including ISA income); and
    • it does not reduce your standard of living.

One way to combine the use of your CGT annual exemption with IHT planning could be to make an outright lifetime gift of investments. Such gifts would count as a disposal for CGT purposes and a potentially exempt transfer for IHT. The recipients of the gifts would start with a base cost for the investment equal to the gift’s value and there would be no IHT to pay at any time, provided you survived for the following seven years (possibly reduced to five under OTS proposals).

ANNUAL GIVING

ISAs – INDIVIDUAL SAVINGS ACCOUNTS

There are five important tax benefits which are common across the different types of ISA:

·         Interest earned on cash or fixed interest securities is free of UK income tax.

·         Dividends are free of UK income tax.

·         Capital gains are free of UK CGT.

·         There is nothing to report on your tax return.

·         On death, the income tax and CGT benefits of your ISAs can effectively be transferred to a surviving spouse or civil partner.

The overall maximum that can be invested in all ISAs in 2019/20 is generally £20,000 (£4,368 for Junior ISAs). There are no carry forward provisions, so like the CGT annual exemption it is a case of use it or lose it.

Dominic Thomas
Solomons IFA

You can read more articles about Pensions, Wealth Management, Retirement, Investments, Financial Planning and Estate Planning on my blog which gets updated every week. If you would like to talk to me about your personal wealth planning and how we can make you stay wealthier for longer then please get in touch by calling 08000 736 273 or email info@solomonsifa.co.uk

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk 
Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?

GET IN TOUCH

Solomon’s Independent Financial Advisers
The Old Mill Cobham Park Road, COBHAM Surrey, KT11 3NE

Email – info@solomonsifa.co.uk    Call – 020 8542 8084

7 QUESTIONS, NO WAFFLE

Are we a good fit for you?