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Home / Latest Trends in Inheritance Tax Planning: Optimising Your Estate for the Future

Latest Trends in Inheritance Tax Planning: Optimising Your Estate for the Future

Jul 12, 2024 | Business Property Relief, Gifting, Inheritance Tax Planning

Inheritance tax planning is an ever-evolving field, influenced by changes in legislation, economic conditions, and societal shifts. Staying updated with the latest trends in inheritance tax planning is crucial to ensure you make informed decisions when structuring your estate.

In this blog post, we will explore some of the latest trends in inheritance tax planning, helping you navigate the complexities and maximize the value of your estate.

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Lifetime Gifting

One emerging trend in inheritance tax planning is the increased focus on lifetime gifting. Lifetime gifting involves transferring assets to your beneficiaries during your lifetime, effectively reducing the size of your taxable estate. By making use of various gifting allowances, such as the annual exemption (£3,000 per year) or small gift exemption (£250 per recipient), individuals can transfer assets tax-efficiently. Lifetime gifting not only helps to reduce the inheritance tax liability but also allows you to witness the impact of your generosity during your lifetime.

Family Investment Companies (FICs)

Family Investment Companies (FICs) have gained popularity as a means of inheritance tax planning. FICs are private limited companies specifically created to hold and manage family wealth. By transferring assets into the FIC, individuals can retain control over their assets while reducing the taxable value of their estate. FICs offer various tax advantages, such as the ability to distribute income tax-efficiently to family members, potentially reducing the overall tax liability. However, establishing and managing an FIC requires careful consideration of legal and financial aspects, so seeking professional advice is essential.

Business Relief (BR)

Business Relief (BR), also known as Business Property Relief, is a valuable inheritance tax relief that encourages investment in qualifying businesses. BR allows individuals to pass on eligible business assets or shares in unquoted companies to their beneficiaries without incurring inheritance tax. The relief is particularly relevant for business owners and investors looking to preserve their wealth and transfer it tax-efficiently. Recent trends have seen an increased focus on investing in BR-qualifying assets, such as trading businesses, forestry, and certain types of shares, to benefit from this relief.

Philanthropy and Charitable Giving

Philanthropy and charitable giving continue to be a significant trend in inheritance tax planning. Making charitable donations through your estate can help reduce the inheritance tax liability, while also leaving a lasting impact on causes that matter to you. In the UK, leaving at least 10% of your net estate to charity qualifies for a reduced inheritance tax rate of 36%. Incorporating philanthropy into your estate planning not only benefits charitable organizations but also provides a meaningful legacy for future generations.

Conclusion

Inheritance tax planning is a dynamic field that requires ongoing adaptation to changing regulations and emerging trends. The latest trends discussed in this blog post highlight the importance of proactive estate planning to optimise the value of your estate and minimize the impact of inheritance tax. Whether it’s through lifetime gifting, establishing a family investment company, exploring business relief opportunities, or incorporating philanthropy, staying informed and seeking professional advice are key to effective inheritance tax planning. By embracing these trends, you can ensure your loved ones are well provided for while leaving a lasting legacy.

* Estate Planning and Inheritance Tax are not regulated by the Financial Conduct Authority

Business Property Relief invests in assets that are high risk and can be difficult to sell such as shares in unlisted companies. The value of the investment and the income from it can fall as well as rise and investors may not get back what they originally invested, even taking into account the tax benefits.

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There are numerous ways to mitigate Inheritance Tax Planning (IHT), but we find that the majority of cases utilise a combination of the following:

Inheritance tax planning traffic light comparison

AccessSpeedSimpleControlCost
Gifting
Whole of Life
Loan Trust
Discounted Gift Trust
Flexible Reversionary Trust
Business Property Relief
How each of the solutions fare in relation to these issues is indicated above using a traffic light system; green being the most favourable.

Please note: this graphic is subjective to change, not every expert will agree on the distribution of colours. There is much more to know before you act and that you should always seek financial advice first.

If you have any questions or queries call us on: 0800 093 4115

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