Know your limits – With solicitor Charlotte Searle

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My name is Charlotte Searle, I am a solicitor and fully qualified member of both the Society of Trust and Estate Practitioners (STEP) and the Association of Contentious Trust and Probate Specialists (ACTAPS).

During our lifetime various taxes are payable on our income and assets, so it is unsurprising that many of us would prefer to minimise inheritance tax on our assets after we die. Knowing the limits for passing on assets before inheritance tax becomes chargeable can highlight opportunities for arranging your affairs to mitigate tax.

Generally, estates worth up to the value of the nil  rate  band  (NRB)  can  pass  to persons other than spouses or civil partners without incurring inheritance tax (there is an exemption from inheritance tax on assets passing between spouses or civil partners).

The NRB is currently £325,000 for each individual. Spouses and civil partners can also transfer their allowances between them giving a potential combined NRB of £650,000 on the second death. To the extent that a person’s lifetime gifts or net assets exceed the NRB, inheritance tax can be levied at a rate of 40%.

Giving assets away during life is one way to try to avoid exceeding the NRB at the time of death. Each individual can give up to £3,000 each year without incurring inheritance tax or using up their NRB. Gifts beyond that allowance can also escape inheritance tax (or using up the NRB) if the person making the gift lives for at least seven years after making the gift.

However, making an outright gift of a house (which for many people is their most valuable asset) can be ineffective for inheritance tax purposes if the person making the gift continues to occupy the house until they die. Taxation of wealth tied up in homes is therefore often a significant issue, especially locally.

From April 2017 an additional “residence nil rate band” (RNRB) tax allowance was introduced for persons leaving their main residence to their “direct descendants” (broadly meaning children and step-children). Initially this allowance has been set at  £100,000 for each individual, but will increase each year to an anticipated maximum of £175,000 by 2020. Spouses and civil partners will be able to transfer unused RNRBs between them.

Arranging your affairs to take advantage of the RNRB could save up to £140,000 in inheritance tax on the combined estates of spouses and civil partners. However, there are some strict and apparently arbitrary criteria for the   allowance   to apply. When looking to maximise potential inheritance tax savings it is therefore important to take advice on your own specific situation to identity the limits and opportunities for tax planning.

Neale Turk LLP has been providing local, friendly, expert legal advice for over 50 years. For advice on the Inheritance Tax issues discussed here and other Wills, Probate and Court of Protection matters please contact us.



If you would like further legal advice from Charlotte you can contact her at both our Fleet and Basingstoke offices or via

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