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Year End Tax Review 2005


Contents

Don't leave it to chance

Family tax planning

Tax payback - tax credits

Pay rise for the other half?

Jam today, or jam tomorrow?

Pension payments and tax relief

Employee pensions

Children's pensions?

Borrowings and tax

Investment limits

Employee cars and fuel

Give generously and save tax

Capital gains

Capital losses

Second homes

Company or trade?

Inheritance tax

Children's savings?

Business tax

Two jobs = too much NIC?

Should VAT be flat?

Mutiny and bounty

One careful owner

A matter of trust

Inheritance tax


Inheritance tax is often thought of as a tax for the rich, but it is really a tax for the unprepared - the rich have usually made their arrangements and pay very little. Although IHT is not so closely related to the tax year, an annual review of tax matters can usefully include checking the exposure to IHT and whether anything can be done to mitigate it. In particular, it is useful to have a clear and up-to-date Will, which has been drafted with tax in mind. This is particularly important if you have total assets, including a house and any insurance policies which would be paid to your estate on death, in excess of £263,000 - the starting point for IHT.

There are a number of standard, unobjectionable measures which people can take to save very significant amounts of IHT. These include:

- reviewing the payees of the proceeds of insurance and pension policies - if the insured person's executors are entitled to the money on a death, there will be unnecessary IHT;

- making regular gifts during lifetime rather than saving up for a big legacy on death - the regular gifts are generally not chargeable at all, while the big legacy is likely to cost 40% in tax.

Married couples can also take advantage of both their nil rate bands to exempt £526,000 of assets, as long as they plan in advance.

Action Point!
Have you considered how much IHT you might pay?

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