Did you know the Inheritance Tax (IHT) rate is 40%?

Will I need to pay Inheritance Tax (IHT)?

If your assets are over the Nil rate Band which is currently £325,000 then YES. This includes any assets held anywhere in the world, or given away within 7 years of your death.

But there is an additional allowance called the Residence Nil Rate Band which allows you to gift another £175,000 tax-free to a child, stepchild or other ‘lineal descendant’ such as a fostered child. The rules surrounding this are quite complicated and you should really seek advice relating to your personal circumstances.

There are other things you can do to save having to pay IHT:

  • Spend it all now
  • Make a Will and leave it to your spouse or civil partner – it becomes taxable on their death but they have a chance to spend it first
  • Give your income away
  • Make a £5,000 wedding gift to children
  • Give £3,000 away each year
  • Die on active military or police service
  • Release equity from your home and spend it now
  • Put it into a Discretionary Trust and reduce the tax rate
  • Give it away to get below the tax threshold and live 7 years
  • Invest in certain qualifying shares and you only need to live only 2 years

As Roy Jenkins, then Chancellor of the Exchequer, famously said Inheritance Tax is “a voluntary levy paid by those who distrust their heirs more than they dislike the Inland Revenue.”

In other words, it is easy to get out of, but you MUST start planning early. IHT planning shouldn’t be put off until think you ought to start thinking about it – you should do it now to maximise the legal mitigation opportunities that are available to you.