Inheritance Tax – Planning and Options

Inheritance tax, also known as estate tax, is a tax levied on the value of a deceased person’s estate. It is paid by the person responsible for administering the estate, such as the executor or administrator. In the United Kingdom, inheritance tax is currently levied at a rate of 40% on the value of an estate above the inheritance tax threshold, which is currently set at £325,000.

There are several ways to reduce inheritance tax in the UK, including the following:

  1. Make use of exemptions and reliefs: There are several exemptions and reliefs available that can reduce the amount of inheritance tax that is due. For example, the inheritance tax threshold is doubled for married couples and civil partners, meaning that a surviving spouse or partner can inherit an estate worth up to £650,000 without incurring any inheritance tax. Other exemptions and reliefs include those for gifts to charities, gifts to political parties, and gifts of certain types of business assets.
  2. Make gifts: If you are planning to leave an inheritance, you can reduce the size of your estate by making gifts to your beneficiaries during your lifetime. There are limits on the amount of gifts you can make each year without incurring any inheritance tax, and some gifts may be subject to inheritance tax if you die within seven years of making them.
  3. Use a trust: Trusts can be an effective way to reduce inheritance tax, as they allow you to pass on assets to your beneficiaries without transferring ownership outright. Trusts are complex legal arrangements, so it is important to seek advice from a solicitor or financial advisor before setting one up.
  4. Write a will: A will allows you to specify how you want your assets to be distributed after your death, and can be an important tool for reducing inheritance tax. By including specific provisions in your will, you can ensure that your assets are distributed in a way that minimizes the amount of inheritance tax that is due.
  5. Review your assets: It may be possible to reduce the value of your estate by reviewing the assets you own and considering whether any can be sold or transferred to a lower-tax bracket. For example, you may be able to reduce the value of your estate by selling assets that have appreciated in value or by transferring assets to a trust or a business partner.

By considering these options and see((happy to help where I can) you will be able to reduce the amount of inheritance tax that is due on your estate. Keep in mind that inheritance tax planning can be complex and may change over time, so it is important to regularly review your estate planning strategy to ensure that it remains effective.

Contact me here when you are ready to get a move on with your planning

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