Tax Planning
Inheritance Tax
This is a tax that's sometimes payable by your estate upon your death. It only applies if the taxable value of your estate when you die is above £312,000 (2008-2009 tax year), but it can also be payable on assets you gave away during your lifetime. Assets include things like property, possessions, money and investments.
There are also a number of exemptions which allow you to pass on amounts during your lifetime or in your will without any Inheritance Tax being due, for example:
- If your estate passes to your husband, wife or civil partner and you are both domiciled in the UK there is no Inheritance Tax to pay even if it’s above the £312,000 threshold
- Any unused nil rate band on a person's death can be added to the surviving civil partner or spouse's estate on their subsequent death
- Most gifts or transfers made more than seven years before your death are exempt (but see the next section on trusts and companies)
- Transfers of assets into most trusts and companies are subject to an immediate Inheritance Tax charge if they exceed the £312,000 Inheritance Tax threshold (taking into account the previous seven years' chargeable gifts and transfers).
- Certain Trusts such as Loan Trusts, Absolute or Bare Trusts are not subject to this immediate charge.
- Discounted Gift Trusts may, subject to underwriting, not be subject to an immediate charge or may be subject to a reduced amount.
- Certain other gifts, such as wedding gifts and gifts in anticipation of a civil partnership up to £5,000 (depending on the relationship between the giver and the recipient), gifts to charity, and £3,000 given away each year are also exempt
Income Tax
Everyone who is resident in the UK for tax purposes has a ‘personal allowance’, which is an amount of taxable income you are allowed to earn or receive each year tax-free.
This tax year (2008-2009), the basic personal allowance - or tax-free amount - is £5,435. You may be entitled to a higher personal allowance if you are 65 or over.
Our advisers are able to look at investment solutions to mitigate your income tax liability.
Capital Gains Tax
CGT is a tax on capital gains. When you sell or give away an asset that has increased in value, you may be taxed on the gain (profit). This doesn’t apply, in most cases, when you sell your main home.
CGT is worked out for each tax year (which runs from 6 April one year to 5 April the following year). It is charged on the total of your taxable gains, after taking into account:
- certain costs and reliefs that can reduce or defer gains
- allowable losses you have made on assets to which normally CGT applies
- the annual exempt (tax-free) amount (the AEA) – this is £9,600 for every individual in the tax year 2008-2009
The above information is based on current tax legislation and is subject to change. If you wish to discuss this further you should contact us, or your tax advisor.