Revisiting your Inheritance Tax strategy
The latest data from HMRC revealed IHT receipts for April 2021 to March 2022 were £6.1bn, 14% (0.7bn) higher than in the same period 12 months earlier.
Receipts have increased partly due to higher death rates during the pandemic, as well as due to the rise in property prices which has seen more families coming into scope for IHT. With thresholds frozen at current levels, the nil-rate band of up to £500,000 – IHT is effectively a stealth tax.
Below are a few IHT top tips:
- Gifts – use your £3,000 annual allowance before the end of each tax year, or you can make gifts of up to £250 per person per tax year.
- Make a Will – and keep it up to date
- Leave money to charity – if you leave at least 10% of your net estate to charity, the IHT rate reduces from 40% to 36%
- Take out life assurance – this won’t reduce your estate but instead provides a lump sum to your beneficiaries to help pay the IHT bill. The policy should be written in trust.
- Trusts – for example, putting money into a trust to pay for a grandchild’s education or to support a range of potential beneficiaries.
- Pension nomination – minor tweaks to where to direct the potential death benefits can prevent large IHT issues on the estate of the second spouse on death.
- Take advice – sensible IHT planning can help to reduce the amount of you IHT your beneficiaries will have to pay and safeguard your wealth.
By Philip Harper | October 2022
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