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Inheritance Tax (IHT) Allowances Transferrable To Your Spouse

January 26, 2017

Advice on inheritance tax allowances from Optimise Accountants

By Louise Misiewicz

Has your spouse passed away without using their £325,000 IHT allowance?

Are you looking at your own inheritance tax planning (IHT)?

I’ve been discussing IHT planning with my team of property tax experts, and we came up with some interesting examples of how property investor clients could reduce their IHT liability in 2017.

If Angela had net assets of £400,000 then you may think that an IHT liability would arise. This is because £400,000 is not less than the £325,000 allowance.

This is because £400,000 less the £325,000 IHT-free allowance leaves £75,000 chargeable assets to IHT. The rate of tax on this would be 40%, or a figure of £30,000.

This may be seen within the government website.

Does this need to be paid? Maybe not – let me explain here, as I did with my property tax specialist team.

If Angela was previously married to George who died in the last tax year and did not utilise his IHT allowance fully because he only transferred £200,000 through his Will, then he would have only used £61% of his IHT allowance.

This leaves 39% of the IHT allowance to be transferred to Angela.

This means that Angela gets to use the 39% times by the new rate of IHT if it increases in the future, rather than the £325,000 limit that was available to George.

This means that Angela’s new rate of IHT allowance is £450,000, being £325,000 (at current rates) plus the £125,000 left by George. Angela’s asset value of £400,000 would therefore not be liable to IHT.

Minimise your IHT liability

Our team of property tax experts are on hand to best advise our clients how to minimise IHT – get in touch here to find out more about how we can advise you on the following areas:

How to decrease inheritance tax

How to minimise IHT

How to minimise inheritance tax

By completing this simple HMRC form you will see that you can save a lot of tax by transferring unused IHT allowances to a spouse. Our team of IHT planning specialists can also advise you further on this.

Transfer of assets

We have already written an article here to show you how the above IHT liabilities may be reduced further by transferring assets before death.

You can transfer assets to someone else at a value of £325,000 and they then survive within seven years, then this would reduce the asset value upon death. Transferring assets is an effective IHT planning tool.

We also provided examples of how you can use discretionary trusts to minimise both Capital Gains Tax (CGT) and IHT in this useful and insightful tax planning article.

Finally, if there are assets used in a trade then you may also be able to claim Business Property Rollover (BPR) meaning that no IHT liability arises – find out more in this article.

How to engage with us

If you want to understand how to implement this strategy or to discuss other finance and tax questions, then please book some time with us using the below calendar.

Please use the redeem code “Article 33” to get 33% off your next consultation call.

If you are looking for a new accountant, then please book some time with us using the below calendar.

Please note that this booking is to describe our services and will not be used to discuss your personal tax affairs.



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Telephone: 0115 939 4606
Email: simon@optimiseaccountants.co.uk