Financial planning can help reduce inheritance tax liabilities

It is why Caroline Allen and Joanne Baker, co-founders of Yorkshire Financial Planning, have been extra busy.

Jo says: “We have seen a substantial increase in enquiries over the past few weeks from customers who are very keen to discuss IHT implications, especially with rumours swirling in anticipation of the Spring budget.”

The rumours range from abolition, which is highly unlikely given the revenue the tax brings in, to cuts and possible rises.

Caroline emphasises the complexities surrounding IHT and says: “Inheritance tax is such a highly complicated and emotive issue.

“It is advisable to formulate a plan during significant life changes, such as nearing the end of mortgage payments or when children leave home. These moments coincide with reduced living expenses and increased opportunities for savings.”

Contrary to popular belief, the impact of inheritance tax extends far beyond the realm of the wealthy elite. With property values steadily appreciating over time, an increasing number of Yorkshire homeowners are finding they are leaving their loved ones an estate that will be subject to significant tax upon inheritance.

This underscores the importance of proactive financial planning to safeguard assets and minimise tax liabilities.

The question is when to start talking to family about plans and wishes. Caroline and Joanne say transparent communication about inheritance and gifts within families is paramount.

Initiating discussions about plans and wishes early on can help ensure that intentions are clearly understood and accounted for.

Caroline says: “Parents can often be concerned about appearing biased when they have children at varying life stages within a large family, but engaging a financial adviser can facilitate productive money-related conversations within the family unit.

“By engaging in open dialogue with family members, you can mitigate the risk of misunderstandings and disputes. This facilitates a smoother transition of assets and minimises potential tax burdens for beneficiaries.”

When do you start paying IHT? It is typically due on estates valued above the nil-rate band threshold, which currently stands at £325,000 per individual.

Additionally, there is potentially a residence nil-rate band of up to £175,000 per person for residential properties passed on to direct descendants subject to specific qualifying criteria.

It pays to familiarise yourself with these thresholds and plan accordingly to manage tax liabilities effectively.

What about how to know when and what to gift? It requires careful consideration of individual circumstances and tax implications.

Joanne says:It is imperative for people to take proactive steps to safeguard their assets and mitigate tax liabilities.

“By staying informed and engaging in strategic financial planning, property owners can ensure a smoother transfer of wealth and leave a lasting legacy for their loved ones.”​​​​​​​​​​​​​​​​​​​​​

Yorkshire Financial Planning, www.yorkshirefinancialplanning.co.uk