SJB & Co Chartered Accountants

IHT Year-end Checklist for 2021-22

Inheritance tax (IHT) planning check list

  • Make sure you have an up-to-date Will. Dying without a Will can cause all sorts of problems for your surviving family as well as affecting your IHT liabilities.
  • Make the most of the annual gift exemptions. You can only carry forward the £3,000 unused annual allowance for one year.
  • Gifts of up to £250 per person (but no more than £250 per recipient) are exempt and can be made to an unlimited number of people.
  • Wedding gifts can be exempt, the limits are to a child £5,000, to grandchild £2,500 and to anyone else £1,000.
  • If you make regular gifts, say a contribution to grandchildren’s school fees, in excess of the £3,000 gifts allowance, you may qualify for the normal expenditure out of income exemption and avoid any IHT charge on the excess. You will need to demonstrate that the gifts were made out of your disposable income. i.e. you do not have to dig into your saving to make the payments. Keeping accurate records of your gifts and disposable income is a key factor in claiming this relief.
  • If possible, reduce your exposure to IHT by transferring assets out of your estate. Bear in mind that these transfers, lifetime gifts, may not fully reduce your IHT liability until the 7-year period after that gift is made has expired.
  • If you own a business, take advice on the potential IHT risks and the availability of Business Property Relief. This planning should probably be combined with consideration of the continuing ownership and control of your business after your death.
  • You can reduce the rate of IHT on some assets from 40% to 36% if you leave more than 10% of your estate to charities.
  • If your estate includes significant property holdings this may mean that your executors have to sell property in order meet IHT payable. It may be prudent to leave instructions on which property(ies) to sell.
  • If your circumstances change, for example, if you divorce or re-marry, start a family make sure you make a new Will and reconsider your IHT planning to make sure it is still relevant to your changed circumstances.

The simplest way to avoid inheritance tax is to give assets away and live for at least 7 years afterwards however the loss of control of assets and the risk of running out of money is a concern for many people.

For more information or to discuss any issues raised above please contact Simon Bell by phone on 01376 571358 or email [email protected] . This article is written in general terms and therefore cannot be relied on to cover specific situations . Applications of the principles set out will depend on particular circumstances. It is recommended that you take professional advice before acting or refraining from acting on any of the above content.


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