How To Cut Your IHT Bill

Inheritance Tax (IHT) is a tax on the property, money and possessions of someone who’s died and, after the Chancellor froze the threshold at which people pay it in his 2021 Spring Budget, concerns were growing that he was getting ready to make further changes to pay for the COVID-19 pandemic.

That hasn’t happened. Yet.

Currently, IHT must be paid if the entire value of someone’s assets exceeds £325,000, with the levy charged only on the part above this cut-off. This threshold increases by an additional £175,000 allowance per person if an individual is leaving their main home to children or grandchildren. There are things people can do now to make sure their loved ones pay less in tax when they pass away.

1) Make a will - First and foremost to benefit from the £175,000 allowance that can be used when leaving the main residence to children or grandchildren, you need to make a will.

2) Spend more money - An easy way to avoid paying IHT is to spend assets that are liable and leave those that can be passed on free of IHT, such as pension and other business qualifying investments for example.

3) Sell assets or downsize - Selling your main residence and downsizing means you are free to plan with the released equity.

4) Gifting while alive - You can give gifts of up to £3,000 per year and carry any unused annual exemption forward for one year. You can also make small gifts to the value of £250 for each child per annum. Larger gifts can also be made without immediate tax and may only be liable to IHT if you fail to survive 7 years.

5) Consider leaving money to charity - in some cases leaving money to charity could reduce someone’s IHT.

Please get in touch to start your estate tax.