Making the most of Tax Free Inheritance Tax Relief

There are numerous ways to reduce your your exposure to tax liabilities and making sure you take advantage of Inheritance Tax Relief with the proper planning will help you minimise the amount of money from your estate that goes to the government.  Bourne Accountancy are experts in estate planning and can advise if any of the following reliefs could be applicable to your situation.

Business Property Relief (BPR) – Any ownership of a business, or share of a business will be included in your estate for Inheritance Tax purposes. However, you can get Inheritance Tax Relief of either 50% or 100% on some of an estate’s business assets such as business property, buildings and machinery. Ownership can be passed on as part of the will or while the owner is still alive subject to further rules.

Agricultural Property Relief (APR) – The government has been especially generous to farmers which is understandable given their strategic importance to the UK. The rules are that you can pass on some agricultural property free of Inheritance Tax, either during your lifetime or as part of your will. Agricultural property that qualifies for Agricultural Relief includes land or pasture that is used to grow crops or to rear animals intensively. It also includes farm buildings, farm cottages, farmhouses and stud farms, there are a few exceptions however such as farm equipment and machinery, derelict buildings, harvested crops and livestock and the rules state the property must have been in ownership for two years before.

AIM Listed Shares – The Alternative Investment Market (AIM) is a sub market of the London Stock Exchange designed to let smaller companies float shares. To encourage investment in these smaller companies the government provides a 100% Inheritance Tax Relief provided the shares have been held for a minimum of two years.

Unlisted Shares – Similar to AIM Shares there is a 100% exemption on shares held in a private company, again the shares have to be held for two years prior to death.  This can be a very useful relief for elderly and wealthy taxpayers who can still receive an income from the business without having to be concerned about the future IHT burden.

Listed Company Shares – If you have a controlling interest in a listed company then a 50% IHT relief is available.
Personal Assets – Certain personal assets which are used in a relation to business activities attract a 50% IHT relief.

Additionally, there are other, smaller inheritance tax reliefs that can be claimed:

  • An annual exemption of £3,000, Any unused allowance can be carried forward for one year.
  • Small gifts exemption of £250 per person.
  • Gifts on a marriage or civil partnership: £5,000 from a parent, £2,500 from a grandparent, £1,000 others

There is also an exemption for annual gifts made from income. Basically, a gift will not count as a gift for IHT purposes, if you can demonstrate that the donor’s annual income is at a level to make the gifts without affecting their ability to cover their usual monthly costs.

Gifts to an individual within the nil rate tax band, and with no strings attached, may still be made without any charge to IHT if the donor lives for 7 years after making the gift.

Bourne Accountancy are experts in Inheritance Tax planning and if you haven’t evaluated your estate for IHT purposes recently we strongly recommend a review. All you need to do is compile a list of your assets, let us have sight of your Will(s) and we can consider changes you might make to reduce your exposure to this tax.

Inheritance Tax Relief Information

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