Inheritance Tax Planning

Our team of Private Client Lawyers are experienced in advising on succession and tax planning.

At Herrington Carmichael we receive many questions relating to the legal process on Equity Release or tax and inheritance – after years of property market growth, we are seeing more cases of clients who want to gain an understanding of the Inheritance Tax Reliefs and Exemptions with a little advice on income and capital gains tax.

> UK Care Guides Equity Release Calculator (external website)

Inheritance Tax Planning

Currently an individual has an Inheritance Tax free sum (known as the Nil Rate Band) of £325,000, and the value of their net Estate above this sum may be subject to Inheritance Tax at a rate of 40%.

For individuals who are married or in a Civil Partnership, they can benefit from the spouse exemption, which means that they can transfer assets between each other during their joint lives, or upon their respective deaths, without any Inheritance Tax implications. 

Under current legislation there is also the concept of the Transferable Nil Rate Band. This means that if the first spouse or Civil Partner to die leave their Estate to the survivor of them, then any remaining Nil Rate Band can be transferred to the surviving individual’s Estate upon their death. This means that if both spouses (or Civil Partners) die with full Nil Rate Bands the survivor’s Estate would then have a Nil Rate Band of £650,000.

In addition there is now also the Residence Nil Rate Band which an Estate may benefit from. The Residence Nil Rate Band is currently £175,000.  However, there are strict criteria for qualifying for the Residence Nil Rate Band, as you must leave your property or your Estate continuing your property to direct descendants (which include children, grandchildren and remoter issue, stepchildren and step grandchildren, adopted etc.)

Again, the Residence Nil Rate Band can be transferred to the Estate of the second spouse or Civil Partner to die in a similar way to the Nil Rate Band.

It should be noted that the Residence Nil Rate Band is tapered away at a rate of £1 for every £2 that the net Estate exceeds the £2 million threshold.  Therefore, currently Estates over £2.35 million (or £2.7 million where the Transferable Residence Nil Rate Band is successfully claimed) will not qualify for the Residence Nil Rate Band.

Income and Capital Gains Tax (CGT)

We are recognised specialists in inheritance tax in the UK. In addition, we do have considerable knowledge of income and capital gains tax and often advise on these.

Making a Will

We are able to advise on tax planning matters as part of our Will drafting service, at other times we will give separate advice.

Inheritance tax reliefs and exemptions

Take a look at our list of Inheritance Tax Reliefs and Exemptions and brief description of the principal reliefs and exemptions from Inheritance Tax. It is not an exhaustive list and should not be relied upon without first obtaining professional advice.