Leaving a legacy

It's never too early to start planning for the future, especially when it comes to financial matters. If you want to leave a legacy to your children, it’s important to consider the impact of inheritance tax.

The inheritance tax nil-rate band has been frozen at £325,000 since April 6, 2009, and the threshold is set to remain frozen until April 5, 2028. According to the Office for Budget Responsibility*, this will drag almost 50,000 extra estates into the tax regime each year. The total tax collected is projected to jump from £5.1bn in 2019–20 to £8.4bn in 2027–28.

Most assets in an estate will fall within the realm of being assessed for inheritance tax at 40%, although some, such as familyowned businesses, some qualifying shares listed on the AIM market and farmland, will attract tax relief. Gifts from excess income also qualify for relief and there’s an annual limit of £3,000 for small one-off gifts.

If you want to leave a substantial gift, you need to survive seven years for it to fall outside of your estate, with the tax relief tapered over this period. Further, if more than 10% of an estate is left to charity, the tax rate drops to 36% and there’s a £175,000 nil-rate band on primary residences if left to direct descendants, although this is reduced if the estate is worth more than £1 million.

Call Investec Wealth & Investment (UK) on 0808 164 1234 for a confidential, no-obligation chat, or find out more at investec.com

*https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/inheritance-tax

The contents of this article do not constitute a personal recommendation or advice. It is important to consult a professional adviser before taking any action. Tax treatment depends on the individual circumstances of each client and may be subject to change in future. All statements concerning tax treatment are based upon our understanding of current tax law and HMRC practice and can be subject to change.