ASK THE EXPERTS

NEIL GRANT, A FINANCIAL PLANNER AT ACUMEN FINANCE, JOINS US TO ANSWER A QUESTION ABOUT INHERITANCE TAX

WHAT CAN I DO ABOUT INHERITANCE TAX?

ANSWER: In the last tax year Inheritance Tax receipts hit a record £5.2 billion – despite the introduction of the residence nil-rate band in April 2017. The sharp increase is mainly attributable to rising property prices and the failure of many to put in place appropriate IHT planning.

Each individual has a standard nil-rate band of £325,000 plus a residence nil-rate band, currently £100,000. This will increase to £175,000 by 2020. The residence nil-rate band is available when residential property is left to direct descendants and will effectively allow married couples to pass on an estate worth up to £1m by 2020 without incurring IHT. Despite this, rising property prices will continue to create an IHT problem for many.

There can be very few people who, having paid tax throughout their lives, are happy with the prospect that part of their estate could potentially be subject to IHT at the rate of 40%. Fortunately, there are several options available to maximise the sum which will be passed to your beneficiaries.

One strategy is to spend more for your own enjoyment or to gift excess income or capital to family, friends or to charity. Many clients wish to help their family during their lifetime rather than simply providing a lump sum on death. Our experience is to provide peace of mind and to ensure clients have enough money for their lifetime.

Through detailed cash-flow analysis a Financial Planner can help you identify how much you can spend or gift without restricting your standard of living. The use of Trusts – which doesn’t necessarily need to be complicated – is also effective and enables you to retain some control over the funds. Another option is to take out an insurance policy to cover any IHT payable from your estate.

Whatever your views on IHT, the first step to IHT planning is to talk to a Financial Planning Firm. They will be able to help you and your family create a plan which aligns with your financial objectives. NEIL GRANT, FINANCIAL PLANNER. ACUMEN FINANCIAL PLANNING, 8 RANDOLPH CRESCENT, EDINBURGH, EH3 7TH. TEL: 0131 5263250. WWW.ACUMENFP.COM