Inheritance Tax Planning: What You Need to Know
We help individuals and families to reduce their future Inheritance Tax obligations, which can make an enormous difference to how much your loved ones receive after you die. Inheritance Tax doesn’t apply to everyone, as HMRC says that only 1 in 20 estates in the UK have to pay it. However, for those who do have to pay Inheritance Tax, it’s crucial that the bill is kept as low as possible through tailored tax planning.
In this guide we’re sharing a few basics that you need to know about Inheritance Tax planning. When you’re ready to find out more, set up a meeting with Aaron to explore how TreyBridge can support you.
What is Inheritance Tax?
Inheritance Tax, often shortened to IHT, is tax that’s paid on the estate of someone who has died. The bill is calculated by taking into account all of the deceased’s property, possessions, assets and savings. If all of this comes to more than the tax-free threshold of £325,000, IHT of 40% is charged on the part of the estate above that figure.
For example, if your estate is worth £400,000, the first £325,000 is not taxed. The remaining £75,000 is taxed at 40%, which comes to £30,000. That’s an awful lot of money going to the taxman instead of your family members.
How to avoid Inheritance Tax
There are a few ways to reduce the amount of Inheritance Tax that will need to be paid after you die. Rather than limiting your income so that your estate remains below £325,000, here are a few alternatives:
Everything above the threshold is left to your spouse or civil partner
Alternatively, everything above the threshold is left to an exempt beneficiary, such as a charity or community sports club
Leaving your home to your children or grandchildren can result in the threshold increasing to £500,000
Leaving your home to your kids
As mentioned above, leaving your home to your spouse or civil partner can result in no IHT needing to be paid. Meanwhile, leaving it to your children or grandchildren does still come with Inheritance Tax but the threshold is significantly higher. Please note that this also applies to stepchildren, adopted children and foster children but not nieces, nephews, siblings or other family members.
Passing on unused threshold to your spouse
If an individual dies, they can transfer their unused IHT threshold to their spouse or civil partner, potentially doubling it to £650,000.
We’ve saved a family over £130,000 in Inheritance Tax
You didn’t read that wrong – we actually saved one family over £130,000 in IHT, making an enormous change to our client’s legacy. If you like the idea of saving as much as possible on Inheritance Tax, it’s time to get in touch with the tax consultants here a TreyBridge Accountants.
We can help you cut down your tax
Tagged as: Personal Wealth
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