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Nil-rate band and rates of tax

Bearing in mind the possibility of a change to the IHT regime, individuals who have potential inheritance tax liabilities may be inclined to use their nil-rate band sooner rather than later (see potentially exempt transfers below) and, if they are married, to arrange their asset ownership so that both spouses can utilise their nil-rate band either during lifetime, or on death via their Wills.

If the nil-rate band of the first of a married couple to die can be fully utilised by, say, legacies to children, an IHT saving of up to £100,000 on the second death can be achieved. If there is concern over continuing access to capital for the surviving spouse a suitable Will trust could be used.

Given the future possibility of change in the nil-rate band, where it is desired to make such arrangements, it may be best to use a wording that gifts the available nil- rate band at death rather than a specified figure equal to the current nil-rate band because, if this figure reduces and no action is taken, future unnecessary IHT liabilities may arise.

It remains to be seen whether Labour will eventually introduce tiered tax rates that increase as the size of the taxable estate increases but this is definitely a possibility and again acts as a stimulant for early lifetime gifts if they can be afforded.

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