ERAA Consulting are your accountants in Glasgow.
Been grafting all your life here in Britain. Now sorting out how to pass things on properly to the family. After years of paying your share to HMRC, want to be clever about it, don’t you?
Not trying to dodge anything, just want what you’ve worked for to go to the kids properly.
Ok, let’s give you some useful information…
The UK tax landscape is evolving, making proactive estate planning more crucial than ever. With Inheritance Tax (IHT) and Capital Gains Tax (CGT) changes coming into effect, individuals and business owners must act now to protect their wealth.
Key IHT & CGT Updates for 2024-2026,Your Accountants in Glasgow
- From 6 April 2026, agricultural and business assets worth over £1m will only qualify for 50% IHT relief, down from 100%, effectively introducing a 20% IHT rate.
- Capital Gains Tax (CGT) changes take effect from 30 October 2024:
- Higher rate taxpayers and trustees: All chargeable gains taxed at 24%.
- Lower rate taxpayers: Flat 18% CGT on all gains.
With these changes, effective estate planning can significantly reduce tax liabilities. Below, we explore how lifetime gifting and trusts can help preserve your wealth.
Lifetime Gifting: Reduce Your IHT Exposure
Lifetime gifting allows you to distribute wealth efficiently while reducing IHT exposure. Certain gifts are immediately exempt, including:
- Spousal Exemption – Unlimited tax-free transfers between UK-domiciled spouses/civil partners.
- Charitable Gifts – Donations to registered UK charities are IHT-free.
- Small Gifts – Up to £250 per person annually.
- Wedding & Civil Partnership Gifts – Tax-free up to £5,000 from parents, £2,500 from grandparents, and £1,000 from others.
- Annual Exemption – Up to £3,000 per year (can be carried forward one year).
- Normal Expenditure out of Income – If gifting from surplus income, it can be completely IHT-free.
Potentially Exempt Transfers (PETs)
Gifts exceeding these exemptions are potentially exempt from IHT, provided the donor survives for seven years:
| Time Between Gift & Death | IHT Rate on Gift |
|---|---|
| Under 3 years | 40% |
| 3 – 4 years | 32% |
| 4 – 5 years | 24% |
| 5 – 6 years | 16% |
| 6 – 7 years | 8% |
| 7+ years | 0% |
Important: If you continue to benefit from a gifted asset (e.g., gifting a property but living in it rent-free), it remains part of your estate for IHT.
Capital Gains Tax & Gifting Assets, Your Accountants in Glasgow
Gifting chargeable assets (e.g., property, shares) may trigger CGT on market value at the time of transfer. Strategies to mitigate CGT include:
- Gift Hold-Over Relief – Defers CGT until the recipient disposes of the asset.
- Clogged Losses – Offsetting losses from prior gifts to the same recipient.
- Using Trusts – To shelter future asset growth from personal CGT and IHT liabilities.
Using Trusts for Tax-Efficient Wealth Transfer
Trusts can be an effective vehicle for reducing IHT and CGT exposure by separating legal and beneficial ownership. Key benefits include:
- CGT Hold-Over Relief – Allows deferment of CGT for non-business assets.
- Reduced IHT Liability – Instead of a 40% IHT charge, trusts face a maximum 6% charge every 10 years.
- Nil-Rate Band Gifting – Up to £325,000 per individual (£650,000 for couples) can be settled into a trust every seven years without immediate IHT charges.
Lifetime Trust Planning
- If gifting assets above £325,000, a 20% lifetime IHT charge applies.
- Trusts provide long-term asset protection and controlled wealth distribution.
Using Life Assurance to Cover IHT Liabilities, Your Accountants in Glasgow
Even with careful planning, some IHT liability may remain. A life insurance policy in trust can help beneficiaries cover tax bills without liquidating assets.
- Fixed-Term Cover – Suitable for covering seven-year gift exposure.
- Whole of Life Cover – Provides permanent IHT protection for large estates.
Secure Your Legacy with ERAA Consulting
ERAA Consulting are accountants and tax advisors in Glasgow that understand the issues of local businesses and are on hand to help. We understand that time is precious for business owners. That’s why we’ve refined our processes to deliver exceptional results with industry-leading turnaround times. Contact us. We can even come to you in your office or home in Glasgow.
Disclaimer: This blog post is for general information only and does not constitute professional advice. Seek tailored advice before making financial decisions.
