How Professional Advice Can Save £££’s in Inheritance Tax
I take a detailed look at how professional advice can save an estate £££’s of Inheritance Tax.
This entry follows the superb introductory article of our associate, Demi Trunks, on the topic of Inheritance Tax. If you are new to the topic, I highly recommend reading Demi’s article first https://www.gileswilson.co.uk/insights/inheritance-tax-what-do-you-need-to-know.
A Little Knowledge is a Dangerous Thing
Executors often attempt to calculate Inheritance Tax, or bravely face HMRC’s mammoth IHT400 return for Inheritance Tax without professional advice, only to find themselves in a muddle.
These Executors are capable, and no doubt have diligently researched what they need to do. However, Inheritance Tax and estate administration is a complex area. All too often the Executor, with a little knowledge, sails out into a vast and stormy sea.
Professional advice goes far beyond completing forms and performing inheritance tax calculations. It can save £££’s in Inheritance Tax, as the following example shows.
Example: £222,400 of Inheritance Tax Saved
The Executor, armed with a little knowledge, decides to go it alone. Their relative has died and had two properties. One, a residential property in the UK; the other, a property in the Republic of Ireland.
The property in the Republic of Ireland contained a pasture of land upon which Cattle graze.
Upon taking professional advice, the tax-relief of Agricultural Property Relief was investigated and reports obtained. In this case, Agricultural Property Relief could be claimed, and the value of the estate was reduced by £331,084.
£132,433 potential saving of Inheritance Tax
The property in the UK passes in accordance with the deceased’s Will. The Will sees that the UK property is inherited by the deceased’s children (a 60% share) and the deceased’s niece (a 40% share).
Upon taking professional advice, the availability of the Residence Nil Rate Band and the Transferrable Residence Nil Rate Band (tax-free allowances) was established. Upon further investigation, a Deed of Variation was viable (changing how the UK property is inherited) in a way that benefited all parties and used more of the Residence Nil Rate Bands.
If the parties agreed to the Deed of Variation, then the full Residence Nil Rate Band and Transferrable Residence Nil Rate Band could be claimed. This would see the estate reduced by a further £116,000.
£46,400 potential saving of Inheritance Tax
Moral of the Story
Professional advice can save £££’s in Inheritance Tax and should not be overlooked.
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