Ways To Help Reduce Inheritance Tax

In the event of a person’s death, their estate (such as money, possessions and their share of any property) is usually passed onto beneficiaries. Inheritance Tax (IHT) may be paid on that estate, ultimately reducing the value of how much is passed onto loved ones.

The current individual nil-rate band is £325,000 and if you leave anything above this, the amount is liable to IHT of 40%. We have written previously about the increase in IHT paid this year.

Ultimately, you want as much of your estate as possible to pass onto your beneficiaries. So what steps can you take to reduce IHT?

  1. Make a will – Whilst this is always good advice, it is especially important here. Making a will determines how you wish your estate to be divided and makes things much simpler for those you leave behind as your assets will be distributed as per your wishes. Without a will, this may not happen and your assets may be liable to IHT
  2. Stay within the threshold – As mentioned, the current individual nil-rate band is £325,000 and will remain so until 2026. An additional allowance (main residence nil-rate band) of £175,000 was introduced in 2017. This sum is transferable to a spouse or civil partner on death, meaning a married couple or civil partnership could potentially pass on up to £1 million free of IHT
  3. Gift your assets – In simple terms, gifting money now ultimately reduces the estate value, helping to keep you below the above-mentioned threshold. Not only that, you also get to benefit from seeing others enjoy your gift

These are just a few steps you can take to help reduce IHT. There are other things that can have an effect such as setting up a trust, taking out life insurance or simply spending your money – after all, you’ve worked hard to build up these assets over the years.

IHT planning is something that should be considered sooner rather than later. We are based in Shropshire but also offer professional financial advice to clients across Herefordshire, Powys and Staffordshire.

Want to know more about how IHT could affect your estate? Get in touch with our friendly and approachable independent financial advisers today.