If you own a business or have farmland which may qualify for reliefs from inheritance tax, it is a good idea to have a Will in place in order to maximise this generous tax saving. HMRC have specific rules about apportioning the relief between chargeable and exempt beneficiaries; so without a Will, or if you fail one of the tests, the relief may be lost.
Our experts set out their top tips of things to think about:
- Check the rules to make sure you qualify for 100% relief
At present, assets which qualify for business property relief or agricultural property relief can benefit from 50%, or even 100%, relief from inheritance tax. We can help you to consider whether your assets will qualify and help you to increase the relief as far as possible for your circumstances. Please see our blog on business property relief for more details.
- ‘Bank’ the relief now
If you are considering leaving assets to your spouse, it is a good idea to think about the structure of your Will. This is to ensure that you are still providing for your spouse whilst also ‘banking’ any available relief for your family. This means that if the rules are changed in the future, or the family circumstances change and the relief is no longer available, you have already given the assets away inheritance tax free.
- Pass your relievable assets to chargeable beneficiaries
If you want to leave some of your estate to your spouse (or a charity) and some to other members of your family, think about passing your business assets specifically to chargeable beneficiaries.
Any assets you pass to your spouse already benefit from spouse exemption. Therefore, in order to avoid the complicated apportionment rules, it is a good idea to leave assets which qualify for relief to other family members. You should make sure they are named specifically in your Will.
- Don’t rely on the intestacy provisions
If you die without leaving a Will, the intestacy provisions will take effect. If you are married and have a child, the estate is divided as to £270,000* to your spouse and then the balance divided between your spouse and your child. This can result in additional unnecessary inheritance tax, even if you would be happy for your estate to be divided in this way.