The Inheritance tax threshold is to increase to £325,000 in April 2009. This increase is well below the rate of house inflation. So, many more homeowners will be dragged into the IHT trap.

Furthermore the Accumulation and maintenance trusts, set up to pass assets to children and grandchildren will now be taxed. Putting assets into the trusts will be taxed at 20%, the assets will be taxed at 6% every 10 years, and up to 6% when the beneficiaries take the assets out of the trust. 100,000 people are estimated to have one of these such trusts and they now need to review their tax planning.

Both Spanish and English jurisdictions have inheritance tax. This tax is designed to raise money for the Exchequer and to help re-distribute your wealth. But there are things you can do, either to reduce the tax your estate will pay or to avoid it completely but legally. Our role is to advise you on the English and Spanish Inheritance tax rules as they stand at the moment and look at ways of minimising the impact.

Both tax systems are different and at present there is no double taxation treaty between Spain and the UK for Inheritance Tax. This means that you could pay inheritance tax on your Spanish assets and then pay again on these assets in the UK.

In simple terms English Inheritance tax is levied on estates over the nil rate band at the rate of 40%, but a spouse, or civil partner will pay no tax on assets left to them.

The nil rate band rates are as follows:

April 2005 - £275,000
April 2006 - £285,000
April 2007 - £300,000
April 2008 - £312,000
April 2009 - £325,000

For Spanish tax, there is no allowance for a spouse, but anyone left assets can claim a €16,000 allowance. Tax is paid on any amount above this, at a rate that can go above 80%. It is complex and you are advised to take advice on this.

Civil Partnership Act 2004

This act is now in force and same sex couples can take advantage of it - however, you must have your relationship registered so that you may then pass your assets on to your partner on your death, without any Inheritance Tax being paid.

But you must make a new Will, as any previous Will may not be valid. Dragonfly Wills can help.