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Basics of Inheritance Tax Planning
Are you still puzzling over investments in stocks, pension funds and the capital market and have overlooked financial planning for your dependents after you are no longer there to provide for them? Inheritance tax planning is a crucial component of your financial plan. It will decide what is left behind for your family members and dependents. While it may sound complex, it is very important to not avoid estate planning and to understand inheritance tax laws. This ensures that your loved ones can enjoy a large part of your hard-earned money and investments.
What is Inheritance Tax Planning?
Inheritance tax planning involves saving taxes on the estate after the death of an individual. Following the demise of an individual, the UK government makes a fair assessment of his estate. As per the legal definition of the term ‘estate’, it includes cash deposited, investment products, property and business in the name of the deceased person. If the estate’s worth crosses the threshold set by the UK government, the beneficiaries have to pay inheritance tax. According to 2010-2011 data, the inheritance tax threshold is £325,000 at the time of death of the individual. Anything exceeding this limit is subject to a 40% tax. The threshold has traditionally changed every year. However, in the financial budget of 2010, the government approved the revision of the threshold limit once in four years.
Why is Inheritance Tax Planning Essential?
Effective inheritance tax planning can save thousands of pounds for your family. Consider the example of an individual having estate worth £500,000. According to the law, there is no tax on £325,000 and the remaining £175,000 is subject to a 40% tax. Calculating on these values, the beneficiaries of the individual has to pay approximately £70,000 in taxes. Paying such a huge amount as tax is a setback for even an affluent family.
According to the government, inheritance tax is levied to eliminate the economic gap in the society. In the absence of proper inheritance tax laws, the rich will become richer and the poor will have no recourse to wealthy living. However, adversaries of this tax consider it as an example of bad governance. To this end, the government has provided some exemptions from the inheritance tax.
Inheritance Tax Planning: Leveraging Exemptions
Here are possible exemptions that an individual can incorporate in inheritance tax planning:
- Annual income tax: £3,000 paid as income tax every year is exempted from inheritance tax. If in a given year, your tax amount is below £3,000, the remaining can be carried over to the next year.
- Give away gifts: Depending on the type and reasons, some gifts are exempted from inheritance tax. Wedding gifts or cash by parents worth £5,000 are not taxable under estate laws. Wedding gift to any individual worth £1,000 is also exempted. Gifts to trusts, political parties and charities are not taxable to a specified limit. Small gifts of up to £250 to anyone you know is acceptable under estate laws.
- Regular gifts from income: You can enjoy tax exemptions on gifts from your income such that it does not affect your lifestyle.
- Farm and heritage property: Farm, woodlands or heritage property owned by individuals is exempted in part from inheritance tax. However, the earning from farm or woodlands is not exempted.
Over the years, the UK government has made estate laws more stringent. Without proper inheritance tax planning in advance, it is almost impossible to save 40% tax on the value of the estate. One has to constantly allocate funds for different categories exempted from the tax and align financial planning with the inheritance laws.
It is important to consult providers of Financial Services London for expert advice on estate planning. They will help you make a fair assessment of your estate and advise you on how to capitalise on tax exemptions available in the inheritance tax planning. You can choose from several independent financial planning services available in London to make an informed decision.
About the Author
Kathryn Dawson writes articles for Tower Hill Associates, one of the leading Financial Services London has to offer. As one of around 250 Chartered Financial Planners in the UK, Tower Hill Associates offers truly unbiased and independent financial planning advice, with no ties or links with any companies. An integral part of their service is intelligent inheritance tax planning advice which is about minimising payment of tax in a non-contentious way.
H&R Block Tax Training Course + Australia?
I am planning to do H&R Block tax training course in Australia and as a part of the material they sent me, they say that if you score above 80% in the course, you get a chance to work for them as seasonal tax consultant.
Is this actually the case?
Also they say that if ur selected to work for them during the tax season, they provide you with additional training. What does this involve?
Also, what is the level of diffculty of the course and its assessment methodology?
Also, if you do get work there, are you expected to bring your own clients or do they provide you with the clients??
I did the H & R Block course in the USA. Yes, if you score highly enough in the exam you do get the chance to work for them if you want. however, as a first-year preparer, you may get laid off once the rush is over.
You do not have to provide your own clients in the USA. Additional training in the USA means extra courses (at a discount) to allow you to prepare more complex returns next year.
H & R Block is not for everybody but it can be a useful start in taxation. At the very least it can be a bit of extra cash, but you do have to factor in the time you spend on the training course without getting paid.
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