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Building and protecting your wealth

Ways to Reduce Your IHT Bill

Even if you don’t think you have a sizable amount of wealth worthy of passing down, chances are you might still be liable for Inheritance Tax (IHT). This is payable on death, or it can sometimes be charged when certain assets are given away while you’re still alive. Here are a few ways to help minimise your IHT bill.

This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it.

If your wealth exceeds the current £325,000 nil-rate band in the 2020/21 tax year, your concern about IHT isn’t unwarranted. If you can avoid a bill charging you 40% tax from HMRC, wouldn’t you? Of course, you’ll want to ensure that whatever wealth you do have is secure and safe from unnecessary taxation.

Gifts and exempt transfers

One of the most popular ways to pass on wealth tax-free is by gifting money more than seven years before your death. As you can’t exactly predict when you’ll die, you might run into some issues, but your rate will be reduced as long as more than three years have passed.

Up to a certain value, gifts can be given free of Inheritance tax, no matter when you gift them.

Your gift allowance covers:

  • Large gifts totalling no more than £3,000
  • Unlimited small gifts of up to £250
  • Wedding gifts of up to £5,000 for your children, £2,500 for your grandchildren, or £1,000 for others.

In fact, you can also make payments for things like tuition – anything that fits within your normal pattern of income and expenses – free of IHT. Be sure to document these expenditures for three or more years in case proof is needed down the line.

Additionally, you can provide a charitable gift to a registered charity free of tax, which could help reduce the size of your estate that is subject to IHT and do some good all at once.

If at least 10% of your estate is donated to charity, your IHT rate will be reduced from 40% to 36%.


While there are a few exceptions, normally pensions are excluded from the calculation of how much your estate is worth and luckily, you are allowed to pass on your pension benefits after your death. Don’t forget that you’ll need to name a beneficiary so you ensure your benefits pass on to them without any issues or taxation.

Business relief

Did you know that business assets can usually be passed on? You can do this either in your lifetime or after your death and still receive up to 100% Inheritance Tax relief. A business, interest in business or shares in an unlisted company can typically qualify for 100% business relief. Land, buildings and business-related machinery will usually qualify for 50% Relief, as will shares controlling more than 50% of the voting rights of a listed company.

Getting started with estate planning

Inheritance Tax planning can be a difficult process, especially because rules and legislation seem to change all the time. But with the right financial planning partner, it’s possible to significantly reduce or even eliminate a potential Inheritance Tax liability. If you need help identifying the best ways to protect your assets for future generations, contact us to discuss your options.

Need help with estate planning?
Investments | Financial Planning | Retirement | Save Tax | Protection |

Dental & Medical Financial Services have been helping doctors and dentists to build and protect their wealth, whilst saving tax for over 25 years.
Call Darren to discuss your options.

Tel: 01403 780 770


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