Estate Planning

There is a common misconception that Inheritance tax (IHT) only affects the very wealthy but, generally, increasing levels of personal wealth and the explosion in house prices over recent years have resulted in a greater number of people needing to consider how best to plan to deal with this.

What is Inheritance Tax?


At its simplest, inheritance tax is the tax payable on your estate when you die if it exceeds a certain amount. Your estate is the net value of everything that you own i.e.all of your assets less any liabilities that you have. When you add up the value of your house, your savings and investments you may be surprised at the amount.
Currently, inheritance tax is charged on death at 40% on the value of your estate above the threshold (nil-rate band) of £325,000, subject to any exemptions and reliefs that may be available.

In previous years, we knew in advance what the increase in the threshold (nil rate band) would be. However, this is no longer the case as the nil rate band has effectively been frozen at the current level and seems unlikely to increase for some time.
The Nil Rate Band
The movement over recent years in the nil rate band is shown below:
2007/08                       £300,000
2008/09                       £312,000
2009/10                       £325,000
2010/11                       £325,000
2011/12                       £325,000        
2012/13                       £325,000
If the net value of your estate is within these figures then you may not need to worry about the impact of IHT but, if you have any doubts, then it is worth undertaking a detailed analysis and ensuring that appropriate action is taken at the right time.

Keep in mind though that, following the Pre-Budget Report on 9 October 2007, married couple (and civil partners) can now combine their allowances.

This means that any widow or widower will be able to pass on their estate, making use of both their own individual IHT allowance and that of their deceased spouse.
The change is to be applied retrospectively to allow any living widow or widower to benefit from double the tax-free allowance in addition to full spousal relief.




Action to Consider


Having calculated the potential IHT payable by your estate, it is important to consider the action that could be taken to mitigate this. With suitable professional advice and careful planning, it may be possible to reduce or eliminate a potential IHT liability and ensure that your estate is dealt with effectively and efficiently in accordance with your wishes and with the minimum of delay.




Estate Planning - In Summary...


Estate planning is a complex subject and the legislation covering it is subject to regular change. It is important to understand this and to seek professional advice to ensure that any action you take will have the desired effect on your long term objectives.

At Chilli Financial,  we work with our clients to fully understand their financial situation, developing financial plans that address their overall needs and deal with any estate planning requirements as an integral part of this.

If you would like to take advantage of a free initial consultation with one of our professional advisers, please contact us and we will make the necessary arrangements. There is no obligation to use our services but we are confident that we will be able to demonstrate to you the value of developing a long term relationship with us.     


Chilli Financial is an independent financial adviser directly authorised and regulated by the Financial Conduct Authority (FCA). Our FCA firm registration number is 226157.  

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