A key objective of many families is to protect everything they have worked very hard over many years to build and achieve from exposure to inheritance tax (IHT). At a rate of 40% on most assets other than those qualifying for the main reliefs, business property relief and agricultural property relief, IHT is a bitter pill to swallow in relation to wealth that has accumulated after corporation tax, income tax and capital gains tax. IHT is particularly punitive as it applies to all personally-owned assets sited in the UK, regardless of the fact the owner may never have lived here. Overseas investors in the UK need to take particular care as a result of this.

Common Sense

"IHT is a bitter pill"

We help design sensible planning to make use of statutory allowances and reliefs like the nil rate band for IHT and planning gifts or other Potentially Exempt Transfers, to limit the impact of IHT.

Trusts

Particular tax efficiency can be achieved in relation to assets not needed as a source of income or capital in a person’s lifetime that will grow considerably in the future but have a modest current value. Trusts can be used as an effective means of passing on wealth to future generations without the costs of UK inheritance tax and as a tax efficient holding structure for investments.

Other common uses of trusts, particularly non-UK trusts, are to provide sources of discretionary income and other benefits to family members without unnecessarily incurring UK tax liability. Non-resident trusts can also be an effective tool to defer capital gains tax in certain circumstances.

"it is essential that proper advice is taken"

Trusts can provide additional tax efficiencies in terms of income tax or capital gains for those resident but not domiciled in the UK, to whom special rules known as the remittance basis of taxation (insert link here) apply. However, eligibility for the remittance basis of taxation does not extend to IHT and so it is essential to consider IHT specifically in addition to any other personal tax planning.

Our Service

The complexities of the UK tax system in relation to IHT and the use of trusts means it is essential that proper advice is taken and planning undertaken to avoid any unexpected and unwelcome tax consequences. Therefore we will be pleased to meet with you for a free initial consultation.

For details of our other Tax Advisory services please click here