Life Assurance - Tax planning and life assurance

Capital transfer tax is a tax paid when assets are transferred from one person to another. Certain gifts become liable for this tax which can be payable during a lifetime or on death.

It is an important and sometimes crippling tax, particularly when some-ones dies, because unless steps are taken, the need to raise money to pay the tax due may result in some of the assets being sold, or in businesses and estates being broken up.

From time to time the government changes the rules about the tax, and As we write , the first £500,000 of any estate is tax free.

There are some other exemptions.

Transfers between husband and wife while both are alive and property left to one another on death are free of the tax. Then, in any one financial year running from 6 April to the following 5 April, anyone may give away up to £600,000 without attracting tax. Any number of small gifts of £250 are exempt, as are gifts made out of what is defined as `normal expenditure which don't affect the donors standard of living. (see http://property.practicallaw.com/4-508-9580)

Parents are allowed to give up to £50,000 to each of their children, if they are getting married. Other people may make smaller wedding gifts.

Most contributions to charity are also free of the tax, unless they are very large indeed.

It can be seen from this that for many people capital transfer tax is not a major consideration, at least until the widow or widower dies, as long as the estate passes to the survivor on the first death. But it is surprising just how assets do build up and without careful planning the beneficiaries in an estate may end up paying more tax than they need to. It is especially important for anyone in business on their own account with a partner to look carefully at ways of minimizing the tax liability.

This is where life assurance can play an important part.

Let us look first at the position for individuals.


Tax planning and life assurance

Payroll Giving
It’s all very easy to organise.
Just ask the Personnel or the Payroll Department at your company and, if they already have a scheme, they will give you the relevant forms.  HM Revenue & Customs’ website has a list of Payroll Giving agencies and explains payroll giving in more detail.

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read on: Life assurance and CTT

Capital transfer tax is a tax paid when assets are transferred from one person to another. Certain gifts become liable for this tax which can be payable during a lifetime or on death.

It is an important and sometimes crippling tax, particularly when some-ones dies, because unless steps are taken, the need to raise money to pay the tax due may result in some of the assets being sold, or in businesses and estates being broken up.

From time to time the government changes the rules about the tax, and As we write , the first £500,000 of any estate is tax free.

There are some... see: Life assurance and CTT