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INHERITANCE TAX
PENSION CONTRIBUTIONS
Basics
Generally, inheritance tax (IHT) is due on death at a rate of 40% if the inheritance threshold of £325,000 is exceeded. The
percentage of any unused nil rate band from the "rst death may be transferred to the surviving spouse, allowing up to double
the nil rate band applicable at the date of the second death.
Gifts or transfers made within 7 years of death are also added back into the estate and are liable to IHT, but may be subject to
some exemptions as well as a tapered reduction for tax on transfers between years 3 and 7.
Planning
You have worked hard to create your wealth - now make sure you do all you can to minimise any payments that may be due
for IHT. Estate planning should start early in life but it is never too late to start.
• Do you have an up-to-date Will that re#ects your wishes?
• Are you taking advantage of the available exemptions such as the annual £3,000 exemption, gifts out of income, and gifts
on marriage or civil partnership?
Basics
There are limits to how much can be invested in a pension scheme before a tax charge is payable. To qualify for personal tax
relief, a pension contribution must be made by or on behalf of a relevant UK individual.
Tax relief for pension contributions is restricted by reference to net relevant earnings and the annual allowance. The annual
allowance is currently £40,000 while there is a lifetime allowance which is currently £1.25 million.
However, it is possible to carry forward any unused allowances from the previous 3 tax years.
Major changes to the annual allowance and lifetime allowance will be introduced from 6 April 2016.
Planning
A pension investment is many peoples’ cornerstone as payments into a pension scheme currently attract tax relief of up to a
potential maximum of 60%. However, there are undoubtedly other components of retirement planning.
• When might you retire?
• What are your income expectations?
• Is your current plan likely to deliver your expectations?
Personal Tax Allowances
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