Help protect your family from Inheritance Tax

When you hear the words Inheritance Tax, what do you think?

Not much? Don’t worry if that was your immediate response. Often when I broach the subject with customers, Inheritance Tax isn’t really something they’ve considered. “It’s not my problem. I don’t need to worry about it. I doubt it affects my family.” These are things I often hear.

But today, nearly twice as many families are paying Inheritance Tax compared to just four years ago. So, is it time to see if yours could be affected, too? Absolutely.

Inheritance Tax Guide

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Inheritance Tax can be hard to understand. Our free guide outlines the key facts and steps you could take to mitigate the impact of Inheritance Tax.

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How Inheritance Tax works

Inheritance Tax becomes an issue when you pass away. Whether it affects your family depends on how much your estate is worth at that time.

  • Your estate is everything you own. From your home, car, savings, and investments – down to things like your TV, jewellery, and furniture. (Minus any debts, like your mortgage.)
  • If it’s valued at more than the Inheritance Tax threshold (the nil rate band), anything above it is charged at up to 40%. Usually, the bill can be huge – tens of thousands of pounds even.

And who would have to pay it? Most likely the people you wish to inherit your legacy – in other words, your loved ones. Yep, doesn’t seem fair does it. But keep reading. It isn’t all doom and gloom, I promise.

What are the nil rate bands?

We all have a nil rate band of £325,000 each. If you’re married or widowed, you’ll have a combined nil rate band of up to £650,000.

You may also be able to use a residence nil rate band – worth £175,000 per person. But sadly, not everyone can benefit from this.

This is a good time to think about your estate’s overall value. By breaking it down asset by asset, is it worth much more than you realise? Or – it may be that you’re within the nil rate band now. But what about in the future? Over time, it’s likely your assets will rise in value – potentially pushing you into Inheritance Tax territory.

Families are paying more Inheritance Tax than ever before.

For over a decade, the Inheritance Tax revenue collected each year has hit record highs.

  • Over the 2022/23 tax year, a huge £7 billion was paid.
  • That’s more than double the amount collected a decade ago.
  • And it’s predicted that over the next five years, a further £38 billion more could be taken.

So, why has Inheritance Tax become a bigger issue?

It mainly comes down to the rise in house prices over the years. And the fact that despite this boom, nil rate bands have stayed the same since 2009. (They’re expected to be frozen until April 2028.)

Your house alone may push you over the nil rate band. In fact, it’s often when people value their house – by selling it or paying off their mortgage – that they suddenly realise they have a problem. Sometimes, this can be too late.

Ok, that’s enough of the negatives…

Here comes the positive bit.

By taking steps now, you could reduce your potential liability as much as possible. And give your family the inheritance they deserve. It’s all about doing it in a way that’s right for you.

What steps can you take to reduce your potential liability?

1. Find a solution that’s right for you.

There are so many ways to help reduce your potential liability. But every situation is different. What might be right for someone else could be completely wrong for you. This is where I believe advice could really benefit you. Much more than if you were to look on the internet, for example.

2. Make the most of your options

There’s so much you could do to address Inheritance Tax – all have their own pros and cons.

  1. You could spend your money. I always suggest that customers do this by making memories. Go on family holidays, take that luxury cruise. Speaking to our advisers could help give you the confidence to do this.
  2. Give it away. There are different allowances that can help you gift certain amounts of money.
  3. Then, there are trusts. Your bread and butter with Inheritance Tax planning.

To be fully effective, some solutions need to be in place for at least seven years. So, it’s important to do it sooner rather than later.

3. Build a flexible plan

We understand situations are complicated – and circumstances can change.

People divorce. They pass away. Sometimes, your beneficiaries might not act in the way you expect.

In some instances, we like to make sure there’s a significant degree of flexibility in the plans we help to build. This is one of the things we do well – and it helps to reassure customers.

By being more flexible, you can take comfort in setting up a trust. Knowing that if anything was to happen in the future, you’ve done what you can to keep it within the family. And help benefit generations like your grandchildren – or even great grandchildren.

4. Find a solution for the whole family

Two in three people in the UK* haven’t discussed inheritance with their parents. With almost half finding it an awkward topic to talk about.

But by bringing your children into these conversations early, you could really benefit them. And prevent any difficult discussions in the future.

We’ve noticed that more children are becoming aware of their Inheritance Tax problem. Because as awful as it sounds, they’ll most likely have to deal with it in the future. You’ll no doubt want your loved ones to enjoy your legacy. And with things like houses and weddings becoming more expensive, their inheritance could make such a difference.

Family is a huge part of our focus at Skipton. So, we welcome looking at Inheritance Tax together. Working out a solution for the whole family – rather than the individual.

5. Let our experienced advisers help you

We understand Inheritance Tax isn’t an easy topic to think about.

But equally, it’s important you and your loved ones feel positive about the future.

Do you have an Inheritance Tax liability? If you could benefit from help with your long-term plans, you can book a FREE initial consultation to find out if financial advice might be right for you.

  • A no obligation review. A charge will only apply if you decide to act on a recommendation – and we’ll explain the amounts clearly before you make your decision.
  • No pressure to act on our advice. We’ll give you time to decide what’s right for you.
  • An online review in the comfort of your home, or at any Skipton branch.

Important information

The Financial Conduct Authority (FCA) does not regulate Trust planning, Will writing and most forms of Inheritance Tax planning. Some IHT planning solutions put your capital at risk so you may get back less than you invested. IHT thresholds depend on your individual circumstances and prevailing legislation, both may change in the future.

*New research by Tower Street Finance

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Book a free initial consultation on Inheritance Tax Planning

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