Inheritance Tax and Planning

We help you plan inheritance tax
efficiently and wisely

At Bennett Oakley Solicitors, our lawyers can advise you on calculating and planning for Inheritance Tax, Capital Gains Tax, and Income Tax to be paid on Trusts.

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“The only certainty in life is death and taxes” – Benjamin Franklin

Inheritance Tax Planning

With people living and working longer, coupled with the rise in house prices, Inheritance Tax (IHT) planning is becoming more important than ever. If you leave an estate worth over £325,000 (the current nil-rate band), the estate may be liable for Inheritance Tax, calculated at 40% on any amount over and above that threshold. There is also an additional Residence Nil-Rate Band (RNRB) of £175,000, available in certain circumstances where a main residence is passed to direct descendants.

There are ways to plan your affairs to reduce some or all of the Inheritance Tax owed on your estate. This can save your loved ones tens of thousands of pounds and in some cases, much more. Examples of effective tax planning strategies include:

If you leave 10% or more of your estate to a registered charity, the overall tax rate may be reduced to 36%.
You can gift part of your estate during your lifetime. However, if you pass away within seven years of making the gift, it may still be subject to Inheritance Tax. The first £3,000 gifted each tax year is exempt.
Certain types of assets, such as business property, farms, National Heritage items, and significant artworks—may qualify for Inheritance Tax relief.
You can place your assets into a trust. However, gifts into a trust over the nil-rate band (£325,000) may still attract Inheritance Tax, so seeking expert legal advice is essential when using trusts for estate planning.

Capital Gains Tax Planning

Capital Gains Tax (CGT) is charged on the profit made when you sell or dispose of an asset that has increased in value. Individuals, trustees, and executors should consider CGT when planning asset sales. Our lawyers can advise on strategies to minimise CGT liability, particularly in the context of Trusts and estate administration.

Income Tax Planning for Trusts

We can advise you on the Income Tax rules that apply if you are acting as an executor or trustee. In particular, the taxation of trusts is highly complex, and we are able to provide clear guidance on how to calculate and report any Income Tax liabilities that may arise.

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FAQ Topics

Can I completely avoid paying Inheritance Tax on my estate?

In some cases, careful estate planning can significantly reduce or even eliminate Inheritance Tax liability. This may involve gifting assets, using trusts, or qualifying for reliefs such as Business Property Relief or the Residence Nil-Rate Band. However, each estate is different, and professional legal advice is essential to ensure your plans are both effective and compliant.

What happens if I gift property or money but pass away within seven years?

Gifts made during your lifetime may still be subject to Inheritance Tax if you die within seven years of making them. This is known as the “7-year rule”, and the amount of tax payable may reduce on a sliding scale (called taper relief) depending on how long ago the gift was made. Some smaller gifts, such as the annual £3,000 exemption, are immediately exempt.

Do executors have to pay Capital Gains Tax?

Yes, executors may be liable for Capital Gains Tax if they sell or dispose of estate assets that have increased in value. There are specific rules and exemptions available, and it’s important to calculate gains accurately. Our team can help ensure any tax is correctly reported and paid, avoiding penalties or delays in estate administration.