Ever since the Labour government came to power in 1997, there has been speculation that the inheritance tax (IHT) regime would be tightened up. So far this has not happened and it now looks as though the government has a more relaxed view about passing family wealth down to the next generation.

Certainly the current regime is generous.

• The majority of lifetime gifts of capital are treated as ‘potentially exempt transfers’ or PETs. So long as the donor lives for at least seven years from making the gift there will be no possibility of an IHT charge whatever the size of the gift.
• Assets falling into the categories of either agricultural or business property may never give rise to an IHT liability due to the availability of relief at 100%.

However, for many of us IHT is now a potential problem.

• Many are simply not in a position to make substantial lifetime gifts of capital. As a consequence there is likely to be significant capital value in our estates on death. The position then is that the first £255,000 of value is tax-free (being covered by the ‘nil rate band’) but any balance, subject to any exemptions and reliefs, is charged to IHT at 40%.
• Typically the most valuable assets in an estate are the family home and investments. These are unlikely to be eligible for any IHT reliefs.

It is important therefore to consider ways of mitigating any potential IHT liability. We give guidance in this bulletin on some of the main opportunities for minimising the impact of the tax.

Any plan must take account of your circumstances and aspirations. The need to ensure your financial security and that of your family cannot be ignored. If you propose to make gifts, the interaction of IHT with other taxes needs to be carefully considered. We hope that this bulletin deals with some of the issues relevant to you. We would welcome the opportunity to discuss estate planning with you in more detail.