Inheritance tax and trusts

People with an estate approaching the threshold, business and farm owners, anyone considering significant gifts, and trustees of existing trusts.

How the thresholds work

Each person has a nil rate band, and an additional residence nil rate band may apply where a home passes to direct descendants. Unused allowances can generally transfer to a surviving spouse, which effectively doubles what a couple can pass on.

The residence band is tapered for larger estates, which produces some sharp effective rates in the taper zone. Knowing where you sit relative to these figures is the starting point for everything else.

Business and agricultural property

Business property relief and agricultural property relief can significantly reduce the value of qualifying assets for inheritance tax. The conditions are specific — the nature of the business, the period of ownership and the type of asset all matter — and reliefs in this area have been subject to change.

If a substantial part of your estate is a trading business or land, this is where the planning effort is best spent.

Gifts and trusts

Lifetime gifts generally fall out of your estate after seven years, with tapering in between. There are also exemptions for regular gifts out of surplus income, which are underused and can be very effective for someone with more income than they spend.

Trusts have their own tax regime, including periodic and exit charges, and trustees have real reporting obligations. We prepare trust accounts and returns and keep trustees on the right side of them.