
How To Avoid Paying Unnecessary Inheritance Tax
If the value of your estate exceeds a certain threshold, Inheritance Tax becomes due on the excess amount. With Inheritance Tax currently payable at 40%, this may cause financial hardship to those you leave behind, especially when a house or other property must be sold to pay the tax bill. Why allow your life’s savings to be eroded in this way?
With proper lifetime and testamentary tax planning, plus the use of appropriate trusts in your Will, you can ensure that your loved ones receive the maximum possible benefit from your estate.
Please ask for further details on how any of the above strategies may impact the structure of your Will.
We are unable to give tax, pensions or financial advice; however, we work closely with and can refer you to, other professionals who are able to offer specialist advice, including independent financial advisors, pensions experts and private client lawyers with whom we work to prepare Trusts and conduct all aspects of estate administration.
Inheritance Tax Exemptions and Reliefs
There are several exemptions and reliefs available to mitigate the impact of Inheritance Tax. Some of the possibilities we will discuss with you include:
- Spouse or civil partner exemption. Inheritance Tax is not payable on anything left to a spouse or civil partner who has their permanent home in the UK, nor on lifetime gifts made to them
- UK charity exemption. Gifts to UK registered charities, whether lifetime or by Will, are exempt from Inheritance Tax. If you leave 10% or more of your gross estate to charity the effective rate of IHT on the remainder is in return discounted from 40% to 36%.
- Potentially Exempt Transfers. If you survive for seven years after making a gift to someone, the gift is generally exempt from Inheritance Tax, no matter the value. A reduced rate of Inheritance Tax is payable on the whole gift if the donor survives between three and seven years after making the gift, known as “taper relief.”
- Annual exemption. You can give away up to £3,000 each year, either as a single gift or as several gifts adding up to that amount. You can also bring forward any unused allowance from the previous year.
- Small gift exemption. You can make small gifts of up to £250 to an unlimited number of individuals, tax-free.
- Wedding and civil partnership gifts. Gifts to someone getting married or registering a civil partnership are exempt:
– up to £5,000 to each child
– up to £2,500 to each grandchild
– up to £1,000 to anyone else - Business or Agricultural Relief. If you owned a business, farm, woodland or National Heritage property, relief from Inheritance Tax of up to 100% is available depending on the circumstances.
- Gifts funded by normal expenditure out of income. Such gifts can be exempt from IHT (relief must be claimed; it is not given automatically) although for them to be accepted by HMRC it will be necessary to show that the gift is part of the donor’s normal expenditure and is funded out of income not capital. The relief will not be given if you had been materially reducing your standard of living or running down savings to fund the giving but it can be claimed over giving designed to fund life policy premiums, make contributions into family pensions or make regular gifts into trusts.
Alex Truesdale Wills Limited offers a professional Will drafting and estate planning service covering the Surrey, Kent, Greater London areas, the South Coast of England and Wales.
Call us on 07887 946557 or request a call back here.
Strategies to reduce your IHT exposure
As part of our Will writing service, we will seek to minimise your IHT liability wherever possible – although never at the expense of your wider estate planning goals. Some of the strategies we may suggest include:
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Will Writing And Estate Planning From Alex Truesdale Wills
Alex Truesdale Wills Limited offers a professional and personal Will writing service, giving you flexibility and control for the present and your loved one’s peace of mind about the future.
Contact Alex Truesdale today to arrange a free, no-obligation initial consultation, virtual meetings or face to face.