Below are some suggestions as to how to minimise your Inheritance Tax Liability:
- If you survive for seven years after making an outright gift from which you do not retain a benefit, the gift is not taken into account for Inheritance Tax purposes.
- There is a £3,000 allowance for making gifts in a tax year. This allowance, if not used, can also be carried forward for one year.
- You can make small gifts up to the value of £250 to as many people as you like in any one tax year, but there are strict conditions to this rule.
- You can gift whatever sum you wish (even if it exceeds the £3,000 per annum referred to in point 2 above) if it is out of your surplus income and it does not affect your standard of living. We would advise you to keep a clear record of this.
- Business assets can attract up to 100% business property relief for Inheritance Tax. Furthermore if you own a farm, woodland or National Heritage property, different types of relief from Inheritance Tax may also be available.
- Persons getting married or entering into a civil partnership can receive a gift of up to £5,000 from parents, £2,500 from grandparents and £1,000 from anyone else. Such gifts will not be taken into account for Inheritance Tax purposes in the event of the donor’s subsequent death.
- Gifts to UK charities, UK Political Parties and some national institutions are generally exempt from Inheritance Tax.
- Another way of minimising Inheritance Tax liability can be particular life insurance policies to be written in Trust. If placed into Trust then subject to certain conditions the policy does not then form part of the estate for Inheritance Tax purposes. Instructions are given to the Trustees (usually the life insurance company trustees), which will again allow flexibility to distribute the benefit of the life policy between your surviving beneficiaries. If you have such policies please refer to the relevant investment companies or your Tax Advisor / Accountant for further advice.
- A key step of planning to reduce IHT has to be to ensure that you make a Will.. Just having a Will, however basic, may decrease your IHT liability. Having the right advice with regards to your Will will ensure that you are taking advantage of reliefs that are available to you. Good wording and instructions in your Will can make a major difference to your IHT liability.
Fitz Solicitors are not Tax Advisors and should you require specialised tax advice we strongly recommend you seek advice from an appropriately qualified Tax Advisor.
Please also note that this is a guidance blog only, listing only some straightforward tax planning tips and cannot be regarded as any final or precise advice. We always suggest that our clients keep their eye on developments each financial year and for detailed illustrations of all the tax planning options available we recommend that advice from a tax specialist is taken. Should you require this service we would be pleased to provide recommendations of suitable professionals.
For further information please contact our Private Client Department on 01753 592 000 or email firstname.lastname@example.org