The Alternate Valuation Date is a date six months after the date of a person's death. For estate tax purposes, the executor may choose to place a value on the estate either as of the date of death or on the alternate valuation date. To use the alternative valuation date, the estate value and tax must be less than on the date of death.
An exempt transfer under inheritance tax legislation allowing £3,000 to be given each year as a gift without liability to inheritance tax. This amount has remained unchanged since 6 April 1981.
Avoidance of tax refers to legal strategies and methods by which a taxpayer reduces their tax liability, often through investing in tax shelters or utilizing other deduced deductions and credits allowed by tax law.
Bed and Breakfasting refers to a tax strategy where a shareholder sells a holding and buys it back the next day to realize a loss for tax purposes. However, legislative changes have rendered this practice obsolete for shares due to stricter time requirements.
Blockage discount refers to a reduction from the fair market value of a decedent's block of inventory for the purpose of determining the valuation of an estate.
Bunching refers to the concentration of gross income, deductions, or credits in one or more taxable years to maximize tax benefits.
A bypass trust, also known as a credit shelter trust or an exemption trust, is an irrevocable trust that allows parents to pass assets to their children while reducing or eliminating estate taxes.
Capital Gains Tax (CGT) is a tax on the profit realized from the sale of certain types of assets, occurring at different rates depending on asset type and overall taxable income. This tax plays a significant role in tax planning for investors and businesses.
An itemized deduction allowed for donations made to qualifying charities. Several limitations apply to this deduction, especially for noncash property donations.
An exemption from capital gains tax that applies to gains from the disposal of chattels, which are items of movable personal property, provided their value is less than £6,000. It does not apply to wasting assets.
A Controlled Foreign Company (CFC) is a foreign-based corporation that is controlled by residents of the home country, allowing individuals or companies to potentially shift profits and reduce their tax liabilities.
A deed by which the beneficiary under a will or an intestacy redirects the gift to some other person (who may or may not be a beneficiary of the estate). Provided this is done within two years of the deceased's death and statutory requirements are complied with, the redirection is not treated as a gift for inheritance tax or capital gains tax purposes.
Deferral of taxes allows an individual or business to postpone the payment of taxes from the current year to a later year, providing financial flexibility and potentially reducing the overall tax burden.
Taxation, the effect of which is intended to be borne by the person or organization that pays it.
A Discretionary Trust is a type of trust where the shares of each beneficiary are not fixed by the settlor but can be varied at the discretion of the trustees or another appointed person.
Exempt transfers are specific types of gifts or transfers that result in no liability to inheritance tax due to their special exemptions under tax law.
Exemption Phase-Out refers to the gradual reduction in the amount that can be claimed as a deduction for personal exemptions as Adjusted Gross Income (AGI) rises above a specified threshold.
A professional adviser providing financial counsel in various domains, such as investing, insurance, estate planning, and taxes. Financial advisers can be fee-based, commission-based, or both.
General Anti-Abuse Rule (GAAR) is a set of regulations to prevent tax avoidance by disallowing tax benefits from transactions, arrangements, or practices that have no substantial commercial purpose other than to gain a tax advantage.
The first portion of a chargeable transfer or the estate on death that is subject to a nil rate of inheritance tax. For 2016-17, the nil-rate band is £325,000. From April 2008, it became possible for spouses and civil partners to transfer their nil-rate band to the surviving partner on death, thereby effectively raising the threshold at which tax becomes payable to £650,000.
Non-taxable income refers to types of income specifically exempted from taxation by government regulations. Understanding which types of income are non-taxable can significantly affect an individual’s or business’s tax obligations.
Personal financial planning software assists users in examining revenue and expenses, comparing actual to budget, monitoring assets and liabilities, conducting goal analysis, investment portfolio analysis, tax planning, and retirement planning.
The remittance basis is a UK tax rule affecting individuals who are resident but not domiciled in the UK. It allows them to limit their UK tax liability on foreign income and gains only when these are brought into the UK.
A revocable trust is an estate planning tool that allows the grantor to alter or cancel the trust agreement during their lifetime, providing flexibility compared to an irrevocable trust.
Tax accounting is an accounting specialization focusing on tax preparation, compliance, and planning. It involves the application of accounting principles to adhere to tax laws and accurately report tax-related information.
A tax advantage is a benefit that individuals and businesses experience when they are eligible for a reduction in a charge to taxation, which can arise through exemptions, deductions, credits, or deferrals.
Minimizing tax liabilities legally and by means of full disclosure to the tax authorities.
A tax bracket refers to a range of income that is taxed at a specific rate. As income increases and moves into higher brackets, the rate of taxation is adjusted according to predefined thresholds set by the tax authority.
A tax loophole is an ambiguity or omission in the tax code that allows individuals or corporations to reduce their tax liabilities legally. These loopholes are often the result of complex tax laws and can be used to advantage through strategic financial planning.
Tax planning involves the strategic structuring of a taxpayer's financial activities and affairs in accordance with relevant tax legislation to minimize tax liability. It is a legal and ethical means of reducing the overall charge to tax.
A tax preference item is an income or deduction excluded or partially excluded from regular tax calculations but must be added back for alternative minimum tax (AMT) purposes.
Tax selling involves selling securities, usually at year end, to realize losses in a portfolio, which can be used to offset capital gains and thereby lower an investor's tax liability.
A tax shelter, also known as a tax shield, is any financial arrangement made to legally lower an individual or a corporation's tax liabilities. These shelters can involve transactions or methods that result in deductions, credits, or reductions in taxable income.
Software that helps taxpayers plan for and prepare their tax returns. Programs such as TurboTax and TaxCut help taxpayers analyze their tax situation and take actions to minimize tax liability.
A tax-effective procedure is one that aligns with tax legislation and leads to a reduction in the tax burden, offering financial benefits through strategic planning.
The practice of offering high net-worth individuals investment management, financial advice, and estate and tax-planning services as a unified professional service.
The Westminster Doctrine refers to the principle in UK tax law that individuals and entities may arrange their financial affairs to minimize tax liability. It originated from the 1936 ruling in Commissioners of Inland Revenue v the Duke of Westminster.
