How can you pay less UK inheritance tax?
Inheritance tax costs Britons billions of pounds every year yet a significant part of this can be avoided. With property prices rising every year, more and more people will be liable to pay inheritance tax.
It is estimated that £6.5billion* will be collected by HM Revenue and Customs (HMRC) in inheritance tax in 2023 as more and more people are liable. The standard inheritance tax rate is 40% and is charged on anything above the £325,000 threshold.
Experts recommend following 10 rules or legal strategies that will help people pay less tax to HMRC. These include spending it while still alive and considering putting the family house into trust, although this second point is fraught with difficulty and may not be effective.
You can also make use of gifting allowances which could save your loved ones thousands in tax and make sure you don’t go over the threshold by giving throughout your lifetime
You can make gifts of at least £3,000 to family members and friends tax free in one year. It can be up to £11,000 if you carry an allowance over from a previous year and your child is getting married.
10 ways you could pay less inheritance tax:
- Talk to your parents or grandparents about Inheritance Tax Planning to minimise the impact on their estate
- If you own a business, make sure you know about Business Owner Exemptions
- Donate a part of your wealth (above the threshold) to charity
- Make annual gifts up to £3,000 to family members and friends tax free
- Give away assets at least seven years before you die
- Make the most of wedding gift allowances (up to £5k)
- Buy a funeral plan
- Spend your money
- Be mindful of inheritance tax thresholds
- Make sure your life cover is in a suitable trust
If you are UK Domiciled, or even non-UK Domiciled with UK based assets, you should beware as HMRC will not remind you of your allowances or tell you what steps you can take to reduce your Inheritance tax liability.
* Source https://obr.uk/forecasts-in-depth/tax-by-tax-spend-by-spend/inheritance-tax/
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