Inheritance Tax – How to make the most of leaving wealth

Inheritance Tax Man

Many people are of the view that they spend many years accumulating their wealth so why should they pay tax on it when they die?

However that is often the case with the basic rule being the part of any net estate over £325,000 is subject to tax at 40%. Given the continued increase in house prices in recent years this covers more and more estates. The £325,000 limit used to rise on a regular basis each tax year but unfortunately has not done so since the last election. Some easy options to reduce the effects of the tax are as follows:

 

1. Give as much away as possible! If you do not need the money in your lifetime and were going to give it to someone anyway then if you give away a large amount at least 7 years before death then no tax is payable will be payable on that amount.

2. Certain gifts are exempt in any event – up to £3,000 in any one tax year, usual Christmas/birthday gifts and certain gifts to family on marriage

3. Charitable gifts – these reduce the net tax payable on your estate. If you give more that 10% of your net estate to charity the rate reduces to 36% and any charitable gifts are tax free so reduce the overall tax payable

4. Be aware of “Unused spouse threshold”. In the event that your spouse predeceased you and did not use his/her full allowance it may be possible to substantially reduce the tax payable by transferring the allowance to the second spouse to die. In a recent case a lady had died having been pre-deceased by her husband in 1975. Having transferred his possible allowance the tax on the lady’s net estate was reduced to nil.

5. There are also various specialist allowances for farms and businesses and we would be happy to discuss these with you.

 

For further help and assistance please call 01753 486 777 to arrange an appointment.

 

Helen Barnard, Senior Solicitor