You want to be certain that, when you die, your children and other beneficiaries receive as much of the inheritance due to them as possible.
Is an inheritance taxable? Yes it is. It is not always feasible to avoid paying any inheritance tax (IHT) at all. Indeed, a total of £5.23billion was paid in IHT to HMRC in 2020-21.
However, there are a number of entirely legitimate ways in which you can protect your family from taxes on their inheritance.
Steps you can take to minimise taxes on inheritance:
MAKE A WILL
Simply by ensuring you do not die intestate, you may save your family money. Without a will, your assets will be distributed according to intestacy rules and your executors and beneficiaries could be liable to IHT that might otherwise be avoided.
LEAVE EVERYTHING TO YOUR PARTNER
If your husband, wife or civil partner is your beneficiary, there are no taxes on your inheritance. Also, any unused tax allowance also passes on to your partner and can be applied to their estate when they die.
LEAVE YOUR HOUSE TO YOUR CHILDREN
Since 2017, home owners have been granted an extra tax allowance of £175,000 on top of their nil rate band. However, it’s important to take into account the implications of this when making your will.
STAY BELOW YOUR IHT THRESHOLD
The IHT nil rate band at 2021-22 is £325,000. If the total value of your estate is more than this figure, you will have to pay IHT of 40 per cent on the balance.
GIVE YOUR ASSETS AWAY
You are allowed to pass assets to the people you want to benefit from your estate – and if you live for another seven years, those gifts will be free from IHT. You can also give away £3,000 in gifts or cash each tax year without it being added to the value of your estate.
PUT YOUR ASSETS INTO A TRUST
By doing this, you ensure those assets will not form part of your estate and will, therefore, be exempt from IHT. You can put assets into an “interest in possession trust”, which will allow you a (taxable) income from them while you are alive.
TAKE OUT LIFE INSURANCE
Some people cover any potential IHT liability by taking out a policy that covers the possible IHT bill – then place the policy in a trust to ensure it is outside the estate.
LEAVE MONEY TO CHARITY
Any bequest to a charitable cause is free of IHT liability. And if you leave at least 10 per cent of your total assets to good causes, the IHT on the rest of your estate is reduced from 40 per cent to 36 per cent.
GIVE AWAY ASSETS THAT ARE FREE FROM CAPITAL GAINS TAX
If you own items such as property or shares that have fallen in value since you bought them, they can be passed on to people without any CGT liability.
USING A PROFESSIONAL VALUER
Whatever reason you may have for requiring a definitive valuation of your property, it is highly advisable to use a professional valuer for this purpose.
Copping Joyce Solicitors has extensive experience in the process of providing property valuations. Please contact us today to see how we may be able to assist you.