How to Minimise Inheritance Tax on your Estate

Without sound estate planning, inheritance tax (“IHT”) can cost your heirs a fortune. Although IHT can be a complicated web to tackle, there are several simple ways to minimise or legally avoid paying IHT. At Hello Estate Planning we can help.

What is inheritance tax?

IHT is a tax on the estate of someone who has passed. If your  estate’s value falls below the £325,000 threshold, or nil rate band, then there is usually no tax to pay. To value your estate and get tailored estate planning guidance, please get in touch with our estate planners at Hello Estate Planning.

How can you minimise inheritance tax?

Certain estates do not have to pay inheritance tax.

Give gifts during your lifetime

Giving away cash gifts during your lifetime may reduce your IHT. More specifically, the following allowances can act as a guide:

  • Annual exemption: Each person is entitled to give £3,000 each tax year. If you didn’t use your previous year’s exemption, it is carried over to the next year – providing you with a total annual exemption of £6,000.
  • Wedding gifts: in addition to the annual exemption, each person can give £1,000 to a bride and/or groom (or civil partner). This increases to £2,500 for grandchildren or great-grandchildren and £5,000 if you’re leaving a gift to your own children.
  • Small gifts exception: Each person can give an unlimited amount of gifts up to £250 per tax year.

Leave your entire estate for your partner

If you’re married or in a civil partnership, and your partner is domiciled in the UK, then you won’t have to pay IHT regardless of the size of your estate. In addition, married couples can pass their unused tax allowance to their surviving partner. For more information about this, please get in touch with Hello Estate Planning.

Give to charity

Similar to gifts left to your spouse or civil partner, any amount gifted to charity is exempt from IHT. In addition, if you leave more than 10% of your net estate to charity, this will reduce your IHT from 40% to 36%.

Make a Will

Leaving a Will is a simple way to ensure your estate goes to the people of your choice. This enables you to determine how your assets should be distributed on your death. Contact us to discuss and plan how you can minimise your IHT bill.

Set up a trust in your Will

By setting up a Will trust, you can choose how to give your cash, property or assets for someone else to manage them on behalf of a beneficiary.

Guidance

Inheritance tax and estate planning can be complex. If you need more guidance, please get professional advice before taking any action. Always discuss your plans with a solicitor or independent adviser. Contact the Hello Estate Planning team now.