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5 ways to make gifts and save inheritance tax

We look at five ways you can plan and take action to reduce or eliminate your IHT liability.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

If you’re looking to pass on as much wealth as you can to your loved ones, planning now could help save them thousands.

Please note this article is not personal advice. This is a brief overview of a complex area so if you are unsure how to proceed please ask for specialist advice. Tax rules can change and any benefits depend on personal circumstances.

The basic rules

IHT is usually paid at 40% on the value of your estate (your property, money and possessions) over the £325,000 allowance (the normal nil rate band). There’s also an additional allowance of up to £175,000 if you pass on your family home to children or grandchildren. And, for any joint assets, you can include the value of your share.

If you’re married you can combine your thresholds and transfer assets between each other free of IHT. When one dies, the surviving spouse won't have any IHT liability and you might be able to claim the IHT thresholds which were unused by your late spouse.

Five ways to make gifts and save IHT

Estate planning can be a complicated process, especially as rules and legislation seem to change often. But, with the right forward planning it’s possible to significantly reduce or even eliminate an IHT liability.

You can reduce the taxable value of your estate by gifting. Gifts are typically made directly to the recipient but could also be made to trusts, ISAs and Junior ISAs, or pensions, as part of longer-term financial planning.

  1. Annual exemptions

    In each tax year, you can make gifts of up to the annual exemption of £3,000. On top of this, any unused exemption from the previous tax year can also be used. This means up to £12,000 per couple can be gifted in this way.

  2. Gifts from income

    You can make regular gifts out of income completely IHT-free. These gifts must be from your post-tax income, made habitually and leave you with sufficient income to maintain your standard of living.

  3. Marriage gifts

    Parents and grandparents can make one-off IHT-free gifts on the marriage of their children or grandchildren, of up to £5,000 and £2,500 respectively. If you aren’t a parent or grandparent, you can still gift up to £1,000 within this exemption.

  4. Small gifts

    In each tax year you can gift up to £250 to any number of people completely free of IHT, as long as they haven’t received a gift which uses another exemption.

  5. Donations to charities or political parties

    Gifts to these types of organisation, either during your lifetime or via your Will, are exempt from IHT. If you leave 10% or more of your estate to registered charities on death, the rate payable reduces to 36%.

Guide to saving Inheritance Tax

Advice is often the right place to start

IHT rules are complicated and advice is usually valuable as not considering the tax implications can be very costly for your loved ones. If you are concerned about how much IHT you might be liable for or would like to find out more about the rules, why not contact us today.

There are many strategies we could help you implement, from reducing your IHT liability to helping you maintain more control over your gifts. The rules are complex, especially when considering trusts – our advice team can tell you more and help with your estate planning.

You can find out if we can help with one simple call to our team.

Initially our Advisory Helpdesk will help you determine whether you actually need advice, for many clients we provide information to assist with managing their investments without paying for advice. If you decide to take advice, our charges are competitive.

Book a call back to discuss your IHT liability

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Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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