You will undoubtedly find in The Magazine many adverts for houses at prices which, if you own your own house, give a warm glow of comfort to you and your family. Many of you may be sitting on vast paper profits having paid off your mortgages.

However, whilst this is reassuring, it means, potentially, that there may be a huge Inheritance Tax liability upon your own, or your wife's or husband's, demise. This tax is currently at the rate of 40% on the value of the whole of your estate after deduction of the first £250,000.

For example, a house valued at, say, £450,000 with other nett assets of £50,000 will give a total estate of £500,000. Deduct the Nil Rate Band figure of £250,000 and that leaves a taxable sum of £250,000. Inheritance tax at the rate of 40% is payable on that figure, giving a liability of £100,000 due to the Chancellor.

It doesn't need a mathematician to calculate that, with the average price of property in Surrey, this liability can be enormous, and it must be paid before Probate can be obtained. In fact, the Chancellor has budgeted to receive £2.5 billion in Inheritance Tax in the current tax year. This is an increase of 50% over the past five years.

The liability to Inheritance Tax can be avoided in such a way as to release capital from your own home for your own and/or your children's and grandchildren's benefit. If this is not required, then insurance cover can be arranged to pay the potential liability.
Action must be taken more than seven years prior to the date of death if the tax is to be avoided in full.

If you are married and you are leaving the whole of your estate to your wife or husband no Inheritance Tax will be payable upon the first death. However, on the death of the survivor, the tax will be payable at 40% on the excess over £250,000. But if both wills are drawn so as to place this £250,000 in trust for, or bequeathed to children or grandchildren, then that amount will not be inherited by the survivor and therefore not subject to tax on the survivor's death. This is taking advantage of the fact that each person's estate is entitled to the first £250,000 at nil rate of Inheritance Tax.
The amount of Inheritance Tax payable can often exceed the total amount of Income Tax which has been paid by an individual in his or her lifetime! Don't give the Chancellor of the Exchequer this gift. Take action now!