The gentle thud of tax demands for tax due at the end of this month will serve as a reminder that yet again the end of the tax year is nigh.
Here are some strategies you might like to consider before 5 April in order to minimise your liability to Inheritance Tax and capital Gains Tax:
- Consider passing on an interest in your business to the next generation. Business property relief makes most of such transfers exempt from IHT.
- Use the annual gifts allowance to make gifts to family members and others.
- Set up regular payments where appropriate – if you can continue to maintain your existing standard of living after such gifts they will not be brought into your IHT account, no matter how large they are.
- If you are gifting assets, the best ones are to gift out of your estate are those which you expect to increase in value
- Consider assigning life policies into trust or making them payable directly to beneficiaries.
- Consider realising capital gains before 5 April to make use of your annual exemptions.
For IHT purposes, you can gift the following annually:
- £3,000 - if you do not use the £3,000 limit in one year, you can carry forward the unused relief for one year only;
- £250 to as many different people as you like; and
- As much as you wish to gift out of your income, provided it does not affect your lifestyle.
There are special rules relating to gifts to couples being married or entering into civil partnership, depending on one's relationship to them.
Exempt gifts will not count towards the 'IHT threshold' (currently £285,000) above which gifts (known as 'potentially exempt transfers') may become taxable if the donor does not survive for seven years after making the gift.
Gifts between spouses are normally exempt from IHT altogether.
Note that there are complications when the donee (the person receiving the gift) is not domicialed in the UK for IHT purposes.
If you are considering making substantial gifts of assets, it is always sensible to take professional advice.
