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Inheritance Tax and Capital Gains Tax 

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Unlocking Inheritance Tax (IHT) and Capital Gains Tax (CGT) 

Understanding Inheritance Tax (IHT) and Capital Gains Tax (CGT) is pivotal in managing financial estates. At PKPI Chartered Accountants, we pride ourselves on empowering our clients with the knowledge to navigate these tax landscapes effectively. 

Delving into IHT: A Guide through Inheritance Tax 

IHT, often a concern for many, is imposed on an individual’s estate after their passing. To navigate this tax realm, it’s crucial to explore thresholds, exemptions, and reliefs. 

Threshold Insights 

Inheritance Tax (tax-planning-concept-with-wooden-cubes-calculator-blue-table-flat-lay)

Exemptions and Reliefs 

Within IHT, exemptions and reliefs play a crucial role. Reliefs like Business Property Relief (BPR) and Agricultural Property Relief (APR) act as superheroes, slashing tax liability on specific assets. Additionally, gifts made seven years before passing might escape taxation under specific conditions. 

Mastering CGT: Decoding Capital Gains Tax 

CGT triggers upon the sale or disposal of an asset, surpassing the tax-free allowance. 

Taxable Territory 

CGT covers a wide array of assets, including properties (excluding primary residences), stocks, and high-value personal possessions. 

Understanding Tax-Free Allowance 

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Source (https://www.gov.uk/) 

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Tax Planning Services 

1. Estate Evaluation and Tax Planning 

Identifying potential tax liabilities for both IHT and CGT. Crafting personalised plans to minimise taxes through strategies such as trusts, gifting, and estate restructuring. 

3. Relief Utilisation Guidance 

Assessing eligibility and recommending effective strategies to apply these reliefs, minimising tax burdens on relevant assets for both IHT and CGT. 

5. Maximising Tax-Free Allowances 

Advising on structuring asset sales to maximise tax-free thresholds, ensuring efficient use of allowances for both IHT and CGT. 

2. Trust Setup and Management 

​Structuring trusts to reduce IHT liabilities while safeguarding assets. Managing trusts to optimise tax benefits and ensure future wealth preservation. 

4. Strategic Asset Disposal and Timing 

Evaluating market conditions and tax implications to strategically time asset sales, optimising gains while minimising tax liabilities for CGT. 

6. Property Sale Advisory 

Offering advice on tax implications, reliefs, and exemptions related to property sales, ensuring efficient management of CGT liabilities. 

FAQs

1.What Is Capital Gains Tax.

Capital Gains Tax is a tax on the profit when you sell (or ‘dispose of’) something (an ‘asset’) that’s increased in value. 

2.What is Inheritance Tax.

Inheritance Tax (IHT) is a tax on the estate of someone who has died, including all property, possessions and money. 

3.What's included in the estate.

  • Savings 

  • Possessions, including property 

  • Pension funds (some payments may be subject to tax) 

  • Value of gifts given within seven years before death, except for specific exemptions 

The initial £325,000 of the estate is tax-free; a 40% tax applies only to the amount exceeding this threshold. 

4.How much is the UK Capital Gains Tax.

The following Capital Gains Tax rates apply:  

  • 18% and 28% tax rates for individuals (the tax rate you use depends on the total amount of your taxable income, so you need to work this out first)  

  • 28% for trustees or for personal representatives of someone who has died. 

  •  10% for gains qualifying for Entrepreneurs' Relief. 

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