Inheritance Tax

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What is Inheritance Tax?

Inheritance Tax is a tax on an estate (the property, money and possessions) of someone who’s died. This can be a costly bill for loved ones that are left behind to face under already difficult circumstances.

Inheritance Tax (IHT) generally only applies if an estate is worth more than £325,000. An individual will not be subject to IHT if:

However, if the value of your estate is above the NRB, then the part of your estate above the threshold could be costly and might be liable for tax at the rate of 40%. If there is a will, it’s usually the executor of the will who arranges to pay the IHT. If there isn’t a will, it’s the administrator of the estate who does this. IHT can be paid from funds within the estate, or from money raised from the sale of the assets.

Can I reduce my Inheritance Tax liability?

There are ways that an individual can reduce how much IHT is due on an estate, but it can be complicated. These include:

  • Leaving a legacy to charity
  • Putting your assets into a trust for your heirs
  • Leaving your estate to your spouse or civil partner
  • Paying into a pension instead of a savings account
  • Regularly giving away up to £3,000 a year in gifts
  • Give away assets that are free from Capital Gains Tax.

There are another way to help an individual can reduce Inheritance Tax is through a government backed Enterprise Investment Scheme (EIS)

What is

EIS Tax Relief?

This is a government backed EIS scheme designed to encourage investment in small, growing businesses. An EIS investment is money invested into companies or funds that qualify and have valuable tax advantages as a result. The tax incentives the government offers provide a valuable buffer against this risk for EIS investors. They mitigate the impact of investments that don’t work out and amplify the impact of investments that do well.

The tax advantages are significant

What are the Benefits of EIS Tax Relief?

The main advantage is the chance to invest in the newest and most exciting businesses with the added benefit of tax relief including:

The tax advantages are significant especially for those facing a large Inheritance Tax Bill after a loved one has passed away. The EIS scheme will help take care of this for you, giving you peace of mind and the knowledge that your hard-earned money will be going to an individual(s) or cause(s) of your choice, rather than in Tax!

Is EIS for me?

Anyone who is subject to Inheritance Tax can benefit from the EIS Scheme. Primarily, they are for wealthier investors who don’t need access or income from the amount they invest and can tie up their capital for the longer term.

These might include individuals with:

  • with a large income tax bill
  • with a capital gain from selling a business, investment property or shares, and want to defer paying tax on that gain
  • who have received a tax free lump sum from a pension who want to reinvest the lump sum and get tax relief again
  • who are affected by reduced pension contributions and the Lifetime Allowance.

However, if the value of your estate is above the NRB, then the part of your estate above the threshold could be costly and might be liable for tax at the rate of 40%. If there is a will, it’s usually the executor of the will who arranges to pay the IHT. If there isn’t a will, it’s the administrator of the estate who does this. IHT can be paid from funds within the estate, or from money raised from the sale of the assets.

We can help you.

If you would like to find out more on how you could benefit from this government backed scheme and avoid your loved one’s having to pay a hefty Inheritance Tax bill, please fill out the form on the Contact page and someone will get back to you shortly.