inheritance tax
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elantan
Posts: 21,018 Forumite
Hi all,
we need to get deeper into the retirement planning, I've recently had a news letter from our IFA, that talks about £3k per year for our kids ( kid in my case), I'm trying to get my head round it a wee bit, is this £3k a year from our pensions ? and do we pay tax on them when we withdraw our pension ?
so for eg
£12k a year tax allowance, can we draw down £15k and use £3k for our son and not pay tax on it? so £15k draw down but not paying any tax ? or is it the 12k free from.tax and we would pay tax on £3k so approx 600 in tax ?
the IHT is £325k just to check, this includes pension saving etc , but not the first £150of the house, going up to £175k soon ? so if husband dies his pension transfer to me and his half of home value etc would be taxed on anything over £500k and when I die the remainder over the value if £325k is taxed ?
just trying to understand it here so I can work stuff out
we need to get deeper into the retirement planning, I've recently had a news letter from our IFA, that talks about £3k per year for our kids ( kid in my case), I'm trying to get my head round it a wee bit, is this £3k a year from our pensions ? and do we pay tax on them when we withdraw our pension ?
so for eg
£12k a year tax allowance, can we draw down £15k and use £3k for our son and not pay tax on it? so £15k draw down but not paying any tax ? or is it the 12k free from.tax and we would pay tax on £3k so approx 600 in tax ?
the IHT is £325k just to check, this includes pension saving etc , but not the first £150of the house, going up to £175k soon ? so if husband dies his pension transfer to me and his half of home value etc would be taxed on anything over £500k and when I die the remainder over the value if £325k is taxed ?
just trying to understand it here so I can work stuff out
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Comments
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See
https://www.co-oplegalservices.co.uk/media-centre/articles-sept-dec-2018/transferable-nil-rate-band-explained/
https://www.gov.uk/government/publications/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band/inheritance-tax-main-residence-nil-rate-band-and-the-existing-nil-rate-band
https://www.gov.uk/tax-on-pension-death-benefits
Let's suppose that your only income this year was a pension of £15,000.
£12,500 would be tax free and the balance would be taxed at 20%.
https://www.gov.uk/inheritance-tax/gifts
And take professional advice on IHT planning, particularly if there is a substantial estate involved.0 -
that's very interesting, thank you very much, quite a bit to get my head around0
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"£12k a year tax allowance, can we draw down £15k and use £3k for our son and not pay tax on it?".no... the gift is just a gift... but it would be shielded from IHT considerations should you die within 7yrs of making the gift."so £15k draw down but not paying any tax ?"No - as answer #2 indicates.0
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Are your joint assets worth over £1m?0
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On-the-coast wrote: »"£12k a year tax allowance, can we draw down £15k and use £3k for our son and not pay tax on it?".no... the gift is just a gift... but it would be shielded from IHT considerations should you die within 7yrs of making the gift."so £15k draw down but not paying any tax ?"No - as answer #2 indicates.
ahh right got ya thanksgetmore4less wrote: »Are your joint assets worth over £1m?
they will probably be skirting around it by the time we add everything up, it will depend on OH pensions at retirement0 -
The amount left in your pension pot when you die is free from IHT. If you die before age 75 it is completely free of all tax but over age 75 the beneficiary pays tax at their marginal rate although I think they can avoid that tax by moving the money into their own pension.Hi all,
we need to get deeper into the retirement planning, I've recently had a news letter from our IFA, that talks about £3k per year for our kids ( kid in my case), I'm trying to get my head round it a wee bit, is this £3k a year from our pensions ? and do we pay tax on them when we withdraw our pension ?
so for eg
£12k a year tax allowance, can we draw down £15k and use £3k for our son and not pay tax on it? so £15k draw down but not paying any tax ? or is it the 12k free from.tax and we would pay tax on £3k so approx 600 in tax ?
the IHT is £325k just to check, this includes pension saving etc , but not the first £150of the house, going up to £175k soon ? so if husband dies his pension transfer to me and his half of home value etc would be taxed on anything over £500k and when I die the remainder over the value if £325k is taxed ?
just trying to understand it here so I can work stuff out
Therefore the case for withdrawing money from a pension to give away to avoid IHT is weak.
Personally I am investing in a pension as part of my IHT planning because even if my children were 40% taxpayers they would still be better off by 25% that had I just left the same amount in my will.0 -
If you are going to make regular gifts, then it would be better to source those from savings so that you are not having to draw down additional taxed income. If you are just starting regular gifting then you can still use your exempt allowance from last year, so as a couple you can gift £12,000 now and £6000 in following years.
If your joint net worth is more than borderline in IHT territory then you should consider larger gifts which will become exempt after 7 years.
You don’t have to worry about IHT on the first death as anything left to a spouse is exempt. As you are already paying an IFA why don’t you set up a meeting with them to talk this through in depth?0 -
Keep_pedalling wrote: »If you are going to make regular gifts, then it would be better to source those from savings so that you are not having to draw down additional taxed income. If you are just starting regular gifting then you can still use your exempt allowance from last year, so as a couple you can gift £12,000 now and £6000 in following years.
If your joint net worth is more than borderline in IHT territory then you should consider larger gifts which will become exempt after 7 years.
You don’t have to worry about IHT on the first death as anything left to a spouse is exempt. As you are already paying an IFA why don’t you set up a meeting with them to talk this through in depth?
I think we will do so ( set up a meeting with our IFA) as I've had another idea about tax for both of us on drawdown, but its helpful to get ideas and advice here so I can go look up and learn more so that when we have our meeting it should be a relatively easy process to sort stuff out as we will know aht we are looking to do and will know a wee bit on how ot works
thanks everyone0 -
I think you are a long way off worrying about IHT unless theres a medical issue you havent mentioned (and i sincerely hope not).
If you are only just nudging a million including pension (exempt) and house (pretty much exempt) you'll be well under the threshholds.
Get on and live your lives and revisit that in 20 years.0 -
lol no intention of going anywhere, I just find it handy to get my head round things and understand them so when the time comes I dont have as much to learn and figure out. For example I wasnt aware the pension is exempt, so that does make it so mich easier to plan ... thanks0
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