Inheritance tax is a 40% tax payable upon death or if you give away certain assets while you’re still alive. If your wealth exceeds the current IHT threshold of £325,000 then it’s something of particular concern. If you’re worried about being able to pass on as much money as possible to your loved ones, here are a few lesser-known tips to help you reduce or eliminate your IHT burden.
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.
Did you know that business assets can usually be passed on (either while you’re still alive or after your death) with Inheritance Tax relief of up to 100%? This is because a business, interest in business or shares in an unlisted company generally qualify for 100% Business Relief. Even things related to the business, such as land, buildings and machinery can qualify for 50% Business Relief, along with shares controlling more than 50% of the voting rights of a listed company.
Discounted gift trusts
If you would like to earn income while also building wealth to pass on to your loved ones, a discounted gift trust might work for you. You can still earn regular payments from it, but the contents of your trust will be excluded from your estate for IHT purposes.
If, however, you want the ability to access to your money in case you need it, but you still would like to protect it, then you could try loaning money to a trust. Any growth on your capital is protected from IHT, but you have the option to withdraw it should you need to.
You might know that gifts given to registered charities are free from IHT, which can help to reduce the size of your estate. But did you know that if you gift at least 10% of your total estate to charity, you can reduce your overall Inheritance Tax from 40% to 36%?
Ready to start estate planning?
If you don’t know what you’re doing, inheritance tax planning can be daunting and complicated. Laws and legislation change from year to year so it’s tough to get a handle on all the rules you must follow.
With careful tax and financial planning, you can reduce or even eliminate your Inheritance tax liability.
A professional financial adviser can help you identify the best ways to protect your assets for future generations all while saving you tax. Get in touch with the experts at Dental & Medical Financial Services to get started.