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Inheritance Tax and Capital Gains Tax planning

Inheritance tax is the tax charged on the possessions, property, and money when a person dies. The Government evaluates the worth of the estate, and then reduces the debits from the estate value to arrive at the final inherited wealth.

Assets may include:

• Business or property owned by the person who expired
• Cash at the bank
• Life insurance policies
• Investments
• Vehicles
• No inheritance tax is due if:
• the value of the estate is less than the threshold of £325,000
• the person leaves everything to their spouse / civil partner or donates it to a charity
• If a person is in a civil partnership or is married, and the estate worth is less than £325,000, an individual can transfer any idle threshold to the partner. This can increase their threshold to £650,000. However, the estate will be obliged to pay 40% on everything above the £325,000 inheritance tax threshold when a person dies (or 36% if the person has left at least 10% to a charity)

Capital Gains Tax planning

The tax paid on the profit of selling or disposing an asset, which increases the value or capital, is referred to as capital gain tax. It is the gain made that’s taxed, and not the amount of money received. For example, Ben purchases an asset worth £5,000 and sold it later for £20,000. Thus, the gain made is difference between the selling price and purchase price i.e. £15,000. However, some assets are tax-free and an individual doesn’t have to pay capital gains tax. This applies if all the gains within a year are under the tax-free allowance limit. Disposing an asset includes – selling it, giving the asset as a gift, or transferring the asset to someone else or receiving reimbursement for it.

Capital gains tax is payable on the disposal of:

• most personal belongings worth £6,000 or more, apart from the car. Personal belongings may include: antiques, coins and stamps, jewellery, and paintings
• sets of things, e.g. chessmen
• property that isn’t the main home
• the main home if it is let out or used for business
• business assets

What we do

• Advice on Inheritance Tax (IHT) and family wealth succession
• Calculations and predictions of Inheritance Tax (IHT)
• Guidance on Capital gains tax liabilities; guidance on transfer of gifts with pre-owned assets

For more information Contact Us.