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How to avoid Inheritance Tax

Inheritance tax is the tax paid out of your estate upon time of death if your estate is valued higher than £325,000.  This is known as the Nil Rate Band, anything over this will be deemed taxable at 40%.

Although inheritance tax cannot be wholly avoidable, with careful expert tax planning and utilisation of Wills and trusts and professional planning it is possible to in most cases to significantly reduce tax that without this planning would eat away at your estate.

Reduce inheritance tax through your Will

If you leave 10% (or more) of your estate to charity in your will the government will reduce your inheritance tax rate 36%.  For example if £400,000 of your estate was taxable at the standard rate of 40%, the IHT bill would be £160,000.00. If 105 of your taxable estate had otherwise been left to charity, the IHT bill would be reduced by £16,000.00 to £144,000.00.

As such, you can both reduce your tax bill whilst also helping a good cause or causes of your choice.

Reduce inheritance tax through trusts

By assigning your assets whether they be property, investments or savings into trust there are effective IHT saving strategies that can be put in place. In addition, it is possible to protect family assets to some degree from the effects of family divorce, bankruptcy and long term care. .

Reduce inheritance tax through giving “gifts”

You can give gifts away during your lifetime or via  your wiill that are exempt from IHT.  You can give these gifts to;

  1. Husband, wife or civil partner (even if legally separated) and they are domiciled in the UK

  2. UK Charities

  3. UK Political Parties

  4. Some National Institutions

Alternatively, you can give gifts directly or into trust to anyone and they will be tax free if you live for 7 years. This time can be reduced to 2 years if dealing with certain types of business or agricultural assets.

How can we help?

Our underlying aim is to protect you and your family’s, our specialist advice is based on over 50 years combined experience on all matters relating to Willstrusts and estate planning.

What next?

Whether you need assistance in drafting a tax efficient wills or trusts or you have a few queries surrounding inheritance tax we can ensure you do not pay more tax than necessary.

Simply call our friendly office on 01202 802807 to arrange a free initial meeting to discuss any questions you may have with an experienced solicitor.

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