Alistair Darling's recent budget brought bad news for high earners with income tax to be levied at 50% on those with incomes above £150,000 but at least this budget, unlike Labour's previous few budgets, left the Inheritance Tax (IHT) rules largely unchanged.

In line with long-standing commitments by the government, the IHT nil-rate band from 6th April 2009 has risen from £312,000 to £325.000, while the newly introduced transferable nil-rate band means that married couples can leave a combined total of £650,000 without their heirs having to pay IHT. Coupled with these changes, the fact that house price inflation is on hold means that when it comes to death duties, there are some good opportunities to save tax.

Simon Hughes at Rowlands, said: "In fact, the current depressed economic conditions make it the perfect time to reassess personal tax planning, particularly when it comes to IHT. Married couples can look to gift £325,000 each into lifetime trusts before they die. As long as they then survive for seven years, the nil-rate allowances will be reinstated thereby enabling the family home to pass down tax free to the children, provided the value of the home falls within the combined threshold available to married couples. At the same time, the assets held by the lifetime trusts should all fall outside of the IHT net provided the trusts have been set up in a way that avoids the gift with reservation rules. So, with careful planning, up to £1.3 million can be passed down to the next generation without IHT at 40% ending up in the Chancellor's pockets. The important point is to act now to set the seven year period running."

If you would like help in relation to saving IHT or any other issue please contact Rowlands.