FACT TWO:

The value of your home is likely to be included when your estate is added up for tax purposes – and it is this which has made the tax such a hot topic of late. Property prices have been rising far faster than inheritance tax allowances so you no longer need to be landed gentry with a country pile to be in the tax net.



Many ordinary people with homes in London, the south east or other high priced parts of the country will automatically be in the inheritance tax net now, when years ago they would have been nowhere near it. That’s why we all need to know more than we do about this tax.

Cut Inheritance Tax

The Conservative Party have pledged to cut the Inheritance Tax and stamp duty for first time buyers. This would be paid for from the fees levied on business people who register abroad for tax purposes. It is estimated that this would include some 150,000 to 200,000 people.

His own party has asked the Prime Minister already about tax breaks for rich non-domiciled UK residents

The Shadow Chancellor said he would not chase for their income from off shore accounts he will only ask them to pay the levy.

Give £1m Tax Free

Families could give £1m free from Inheritance tax using perks that are already in place.

2.3m homes are now above the current Inheritance Tax threshold due to the rise I property prices.

By splitting assets between a spouse and children the Inheritance Tax allowance can be doubled to £600,000 before gifts are made.

Couples should split assets before death enabling use of both nil-rate bands and then wills must be updated leaving assets and a share of property in trust for the children.

Although a trust allows a spouse to continue living in the property till death, children could force a sale to gain their share but a trustee would have to approve this. It is for this reason an independent trustee should be appointed.

Gifts of £3,000 maybe given away every year or £6,000 if not having been given previously. A married couple doing this could give up to £12,000 in the first year. This could be done for possibly 20 years allowing £120,000 to be gifted tax-free.

Further gifts over £300,000 can be made but would be liable for Inheritance Tax if the person giving this gift did not live for seven years from the time of the gift.

People worry about giving trusts too early in case their children divorce and remarry but this is where a trust will work as it allows assets to be given away but control can be retained.

The most flexible of these is a discretionary trust as these can have several beneficiaries. Lifetime gifts to these trusts are subject to 20% tax charge over £300,000 so gifts need to be less than that.

Money could be put into a business, as once this is owned for two years it becomes Inheritance Tax free and provided that the investments portfolio did not account for more than half of the company it would be liable for an Inheritance Tax exemption.