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Are You Protecting Your Buy-To-Let Property Portfolio from IHT With This…?

With all the constraints being placed on landlords recently through tax legislation and ever-changing regulation, saving money should be a top priority. It’s surprising to learn that many landlords aren’t taking advantage of life insurance to help reduce “Britain’s most hated tax” – inheritance tax.


This does not constitute advice and advice should be sought in all instances before acting on it. The Financial Conduct Authority does not regulate tax advice. 


It might seem like yet another cost to hit your wallet, but legacy planning is crucial if you want to be able to pass your property portfolio onto the next generation of your family without creating a giant headache for your loved ones.


A brief refresher on IHT

Inheritance Tax (IHT) is a tax that’s due on the estate (the property, money, and possessions) of someone who has died. Anything over an individual’s threshold is taxed at 40%.

There are certain situations where IHT does not need to be paid.

  • If your estate is below the £325,000 threshold or everything above the £325,000 threshold is left to your spouse, civil partner, inheritance tax is not due.
  • That threshold increases to £475,000 if you give your home to your children (including adopted, foster, or stepchildren) or grandchildren.
  • The threshold also increases for the spouse of a deceased person if their estate’s worth falls under their individual maximum allowance.

Understand inheritance tax? Take our IHT quiz to find out


Why life insurance can help

The transfer of your properties to your beneficiaries in the event of your death might seem like a straightforward task, but unfortunately, it’s not. Your mortgage provider can request repayment on any outstanding mortgages. And of course, the inheritance tax bill needs to be settled.

If your family is unable to keep up repayments or doesn’t have the cash available to pay IHT, their only options are either to sell the property or take out a loan to cover costs, which is not always viable.

Life insurance can help cover the costs of some of these.

Unfortunately, simply obtaining life insurance to cover mortgage debts is really only the tip of the iceberg and it does not solve the IHT problem – however, it can reduce the strain on your family.


Take a complete legacy planning approach

The best course of action would be to work with specialists to determine the complete liability of your properties – mortgages and IHT – and seek either a policy that would cover all expenses or two individual policies that would cover these costs separately. If you are married be sure to secure a policy for your spouse as IHT is only triggered upon the passing of the final partner.

It’s imperative you also have the policy written in to trust so that it does not get included in the estate and added to the inheritance tax bill. Plus, your loved ones will be able to access the cash more quickly, allowing them the pay off the debts sooner.


Speak to a specialist medical and dental financial adviser

To ensure your inheritance doesn’t become a burden, speak to a financial adviser who will be able to help estimate your potential IHT tax bill. Once it has been calculated, advisers can assist you in finding and acquiring the perfect life insurance policies that will cover any costs that your beneficiaries may incur. For help with IHT and all your financial planning needs, get in touch today.


Want to protect your family from IHT?
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.

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