In our Ask The Legal Expert column we get the latest specialist advice from the Lifetime Planning team at JCP Solicitors. This month, Mike Downey, Director and Head of Lifetime Planning in South East Wales, based in JCP’s Caerphilly office, discusses Inheritance Tax.
My wife and I are making Wills and we plan to give some money to the children now, before they inherit, to help them set up home. We’re nervous about causing problems for our children with the tax office. What are the rules?
You are wise to set out your Will and your wishes now, in good time, so your family can avoid complications further down the line.
In his latest budget, The Chancellor confirmed that the current thresholds for Inheritance Tax (IHT) will be maintained until April 2026.
As the system stands at the moment:
- Everyone has a £325,000 nil rate band allowance for IHT purposes
- Since you are married you can double the nil rate band on the death of your spouse, because it can be transferred. It is transferrable if everything passes to a surviving spouse, or partially transferred if the first spouse leaves gifts to other people, as long as those gifts are less than £325k
- There is an additional Residence Nil Rate Band available for a residence, if it is left to a direct descendent. (For IHT purposes, the definition of Direct Descendants is quite broad, to includes foster children, step-children, grand-children and others)
- The Residence Nil Rate Band is worth £175,000 per person. This can be doubled upon the death of a surviving spouse
You can give your children or other family members gifts of money, but you must plan this carefully to ensure it is tax free. In simple terms, as long as you live for more than seven years from the date of giving this gift, your family won’t have to pay IHT on it when you die. If you don’t they may be liable for IHT.
It is important to make a detailed record of what was given, to who and when. This will make it easier for your executor to assess what parts of your estate are liable for tax. This is a complex area of law and it is important to seek tailored legal advice.
JCP’s Lifetime Planning team is always on hand for tailored and professional support. For specialist advice, call Mike Downey on 02920 855277 or mike.downey@jcpsolicitors.co.uk
The question posed is based upon a hypothetical situation. This content does not constitute legal advice and is provided for general information purposes only.
