Trusts | Inheritance Tax

 

Can trusts eliminate the tax I pay?

A Trust is a legal arrangement that allows assets such as property or money to be looked after for the benefit of the beneficiaries named in the Will. Trusts are often used to hold assets for children until they are old enough to receive them. Trusts also provide a valuable means by which you can lower or eliminate the impact of inheritance tax on future generations.

Trusts have been instrumental in mitigating tax since medieval times. Trusts were initially created for the nobility and wealthy landowners to avoid paying taxes to the Crown. Since then, there have been many changes to trusts and their uses and equally to the Inland Revenue rules which affect them.

Nowadays, you don’t have to be a nobleman or a wealthy landowner to want to take advantage of the many tax strategies trusts can provide.

Many people look to using trusts as a means of mitigating tax which would otherwise be payable.

Capital Gains Tax

Capital Gains Tax (CGT) is a tax on capital ‘gains.’ When you sell or give away an asset, if it has increased in value, you may be taxable on the gain (profit.) This doesn’t apply when you sell personal belongings worth £6,000 or less or in most cases, your main home.

You may have to pay CGT if for example, you:

- Sell, give away, exchange or otherwise dispose of (cease to own) an asset or part of an asset.

- Receive money from an asset, for example compensation for a damaged asset.

You don’t have to pay CGT on:

• Your car.
• Your main home, provided certain conditions are met.
• ISAs or PEPs.
• UK Government Gilts (Bonds.)
• Personal belongings worth £6,000 or less when you sell them.
• Betting, lottery or pools winnings.
• Money which forms part of your income for income tax purposes.

Inheritance Tax

This is a tax on the value of a person’s estate on death and on certain gifts made by an individual during their lifetime. Broadly speaking, your estate is everything you own at the time of your death, less what you owe. It is also sometimes payable on assets you may have given away during your lifetime. Assets include things like property, possessions, money and investments.

The inheritance tax threshold is the amount above which inheritance tax becomes payable. If the estate, including any assets held in trust and gifts made within seven years of death, is less than the threshold, no inheritance tax will be due on it.

It only applies if the taxable value of your estate is above the current threshold and is only payable on the excess above this nil rate band.

The rate at which inheritance tax is charged is 40%.

FutureSafe Will & Estate Protection Advisers are experts in providing advice on all aspects of tax planning, and with the use of trusts, will provide these ultimate tax savings.

 

 

 

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