Maunby Investment Management in Harrogate has offered expert advice on asset and wealth management since 1982. They explain how you can put plans in place to reduce any future inheritance tax liability.

Inflation and asset growth means that for many people, inheritance tax may become a factor in planning their future financial arrangements. Inheritance tax (IhT) is chargeable both on lifetime gifts and on the estate of someone who has died, and in the latter case, this will usually include the property, money and possessions of the person in question. Tax treatment depends on individual circumstances and may be subject to change in future.

The beneficiaries don’t normally pay tax on the assets they inherit, instead the funds from the estate are used to pay Inheritance Tax to HMRC by the executor who has been appointed to manage the estate, if funds are available.

For most people, working out your inheritance tax allowance is fairly simple. The current inheritance tax threshold, or nil rate band is £325,000, which means that you won’t pay any tax if your estate is worth less than that amount or if you leave everything to your spouse or civil partner, a charity or a community amateur sports club. In addition to this a residence nil rate band, which is an allowance currently of £125,000, is available under certain circumstances on the value of the deceased’s house.

If your estate is worth more than the current inheritance tax threshold, then the part of your estate that’s above the inheritance tax limit may be charged at 40%. For example, if your estate is worth £725,000, the Inheritance Tax charged would in most circumstances be 40% of £400,000, or less if you own and live in your house. If you gave away your home to your children or grandchildren, then the inheritance tax on property would depend on when the gift, or potentially exempt transfer, was made.

Where IhT can become more complex is for those in the higher bracket of assets and income. There are many legal ways to avoid or reduce inheritance tax, and it is never too early to seek advice about managing your estate more effectively.

Maunby Investment Management in Harrogate have since 1982 taken a broader approach to asset and wealth management, which includes estate and capital gains tax planning. Maunby considers inheritance tax to be a very personal matter with no one approach fitting any two clients, which demands a flexible approach from the outset. Some clients are content to make gifts, whilst others may wish to maintain control of their assets to ensure they are not reliant on the next generation should government policy or their needs change. Of course, tax treatment depends on an individual’s circumstances and may be subject to change, and in some cases additional specialist advice may be necessary.

Many of Maunby’s clients are putting plans in place to reduce any future inheritance tax liability, ranging from more complex trusts involving input from a solicitor, to portfolios investing in qualifying shares listed on the Alternative Investment Market (AIM) which benefit from inheritance tax relief. Some have used trusts and inter-spousal transfers to move assets out of their estate in addition to investments that benefit from inheritance tax relief. Flexible solutions can allow access to and control of these assets, and Maunby avoids rigid solutions wherever possible.

While the experts at Maunby will mitigate potential losses as far as possible through careful stock selection and diversification of companies and sectors, investments of all types put your capital at risk and AIM stocks are no exception. They therefore ensure that all clients are comfortable with the level of exposure they have to such investments, and that it fits in with their broader wealth management.

To find out how Maunby Investment Management can assist you with your inheritance tax, visit the website at www.maunby.co.uk