Don\'t miss out on new Inheritance Tax perk ahead of the new tax year

Individuals throughout Tayside could miss out on tax breaks if they fail to review their wills and investments ahead of major changes to Inheritance Tax (IHT) law early next month.

That\'s the warning from Ernest Boath, Head of Private Client at Miller Hendry Solicitors and Estate Agents, who advises: \"As the end of the tax year approaches, it\'s a good time to make sure you\'re maximising your opportunities for inheritance tax reliefs.

\"This year, as well as taking advantage of exempt lifetime gifts and transfers, property owners should also look at how the new transferable residence nil rate band fits their profile.\"

From April 6, each individual can claim an additional allowance of £100,000 to offset the sale of a family home on death, on top of their existing £325,000 inheritance tax exemption. This increases by £25,000 each year until it reaches £175,000 in April 2020, allowing a couple to pass on £1m estates tax-free.

The introduction of the new transferable residence nil rate band (also known as the ‘family home allowance\'), allows couples to pass on a £1m family home free of inheritance tax.

However, not everyone will qualify for the new allowance. It will not be available to those without children, or to many business owners. Estates worth more than £2m will also be penalised.

And, the shake-up also means that many wills are now out of date - and people will not benefit from the new tax break unless they take immediate action to review their estate.

Mr Boath warns: \"The new regime is complicated and falling foul of the complexities could cost your beneficiaries dear. I would advise individuals in Tayside to seek specialist advice as soon as possible.\"

You\'ll benefit from the new rules for inheritance tax residential nil rate band if:

• You have direct descendants and intend to leave your residential property to one or more of them on your death

• You have a total estate worth more than the current £325,000 IHT nil rate band per person threshold, but less than £2.35m overall

• You have downsized or sold your residential property, or intend to, where the sale took place after July 8, 2015 and you have retained the proceeds

More straightforward is the opportunity to mitigate inheritance tax by making smaller gifts or out of surplus income.

Mr Boath continues: \"Everyone can make use of the £3000 per annum annual exemption which can be used to make gifts up to the total each year, and if the allowance is not used fully in any year, it can be carried forward one year.

\"On top of the annual exemption, the rules on small gifts allow individuals to gift up to £250 per recipient per year with no limit to the number of recipients. However, if you give more than £250 to any individual, you lose the exemption completely, even on the first £250. And you can\'t use your small gifts allowance together with any other exemption when giving to the same person.

\"Looking at these two allowances together, if you had three children, ten grandchildren and four godchildren, you could make gifts of £1000 to each of your three children by using the annual exemption of £3,000 for all such gifts. Then you could give up to £250 per year to each of your grandchildren and godchildren using the small gift exemption. You cannot make an exempt small gift to your children as you have already used the annual exemption to make a gift to them. These allowances are automatic, but it\'s a good idea to log and track the gifts as it makes it easier for your executors and simplifies dealing with HMRC.

\"If you\'re concerned about inheritance tax and hope to mitigate it through gifting, asset transfer or the new residential property allowances, it\'s important to check the position regularly. Getting it right, and reviewing any existing will, is key to making sure reliefs are maximised.\"

For further advice or information on employment law or other legal issues, visit www.millerhendry.co.uk