The latest figures from HMRC suggest inheritance tax receipt this financial year will eclipse last year’s record of £7.1bn due to a combination of frozen thresholds and rising house prices.

Once the income tax reporting deadline of the 31^st January has passed, the spring is a great time to review your inheritance tax position before the end of the tax year and we have put together some suggestions to help you make the most of your tax planning opportunities.

1. Maximize exemptions & reliefs

The basic starting point is that each individual has a tax free allowance (Nil Rate Band) of £325,000. Gifts between spouses are tax exempt and widows are able to utilise deceased spouses’ allowances. There may also be additional allowances for residential property of up to £175,000 each that are also transferable meaning a married couple may have up to £1m of allowances available. Structuring estates to secure the maximum allowances is essential.

2. Top up Pensions

Pensions are generally not subject to IHT if the pension scheme administrators have discretion over who sums are paid to meaning a pension can pass IHT free to your nominated beneficiaries. It may also be possible to consider utilising other assets rather than drawing upon pensions to preserve this benefit.

3. Annual Allowances

Each year an individual can gift £3,000 tax free with the ability to rollup to £6,000 if a gift was not made in the previous financial year. This could be a cumulation of gifts over the year or one, outright gift. These are sometime used in conjunction with a trust over a number of year to accumulate a notable fund that could be utilised for something like grandchildren’s education. You can also gift surplus income each year in addition to the standard allowance and certain smaller gifts at birthdays, Christmas and weddings are also excluded.

4. Lifetime Gifts

Gifts over the annual exemption will be fully excluded from your estate for IHT purposes if you survive 7 years. Dependant on the recipient of a gift, lifetime gifts do not usually suffer a tax charge at the point of making the gift (PET) but in certain circumstances can carry a 20% IHT charge immediately, for example as a gift into a trust where the gift (or cumulative total of gifts within 7 years) exceeds £325,000.

5. Investment Choice

Investment portfolios can be structured to include some IHT efficient investments that can for example attract 100% IHT exemption after holding for 2 years or attract an immediate discount. Business Property Relief or Agricultural Property Relief may also apply to business or farm assets.

6. Make or Review A Will

Not only does making a Will assist with the management of available allowances and reliefs referred to in point 1 above, but there is the opportunity to consider succession planning from a tax efficient viewpoint. A Will is the basic foundation stone of an estate and tax planning strategy.

7. Gifts to Charity

Gifts to charity are themselves 100% IHT exempt but, if you leave at least 10% of your estate on your death to charity, you can reduce your IHT rate from 40% to 36%

8. Insure the Risk

Depending on the premiums, a life insurance product can cover the potential liability for IHT and placing the policy into a trust to ensure the funds are available to meet the tax liability but without compounding the tax bill.

9. Enjoy Your Wealth

The old adage of “you can’t take it with you” can be relevant for inheritance tax because if you have had the benefit of your wealth during your lifetime, it will not be taxed at 40%.

10. Plan and review regularly

Personal wealth, tax law, exemptions and mitigation strategies can evolve over time and so it is essential to keep your inheritance tax planning strategy under regular review.

At Clark Willis, we are experienced at working with client to review their inheritance tax position and discuss strategies to mitigate the tax bill and our team includes members of the Society of Trust and Estate Practitioners( STEP) the global professional association for solicitors, accountants, and other advisers who specialise in family inheritance and succession planning. Often this is working alongside your own independent financial advisers to supplement our own advice with financial planning. Where you do not have a financial adviser we are happy to signpost clients to advisers we have worked alongside previously to assist you if required.

If you would like to make an appointment to discuss inheritance tax or estate planning, including Will writing, then please contact your local Clark Willis Solicitors office, in Darlington or Northallerton (01325 281111 or 01609 765765) or email enquiries@clarkwillis.co.uk.