How to Save on Your Inheritance Tax
What is Inheritance tax?
When you die, the government will calculate how much your estate is worth minus any debts you have to get a total value of your estate. Your estate will include assets such as;
- Money in the bank
- Valuables e.g. jewellery or paintings
- Property
- Vehicles
- Any businesses that you own
- Pay–outs from life insurance policies
In accordance with the 2016/2017 tax year, everyone is allowed to leave an estate valued up to £325,000 without their beneficiaries being taxed on it. In fact, it’s good to note that the £325,000 limit has been frozen until 2020/2021. However, if your estate is valued above this figure, it will be subject to a 40% inheritance tax (36% if you leave at least 10% to charity).
Ways to Reduce your Inheritance Tax
Give away seven years before you die: Money given away within seven years of your death is subject to inheritance tax, so plan ahead to distribute your assets while you’re still alive.
Give £3,000 away each tax year: The first £3,000 you give away in a tax year is not subject to inheritance tax if you die. So if you would like loved ones to receive money this is a good way of gifting to them.
Give to charities – Any money donated to charities or political parties are inheritance tax–free.
Marriage gifts – If a friend or family member is getting married you can give a gift without it being subject to inheritance tax. However, there are limits and the marriage has need to go ahead.
Income – Inheritance tax is placed on assets only, so if you have a regular income such as a pension, you can regularly gift this to others as long as you have enough income not to affect your lifestyle.
Financial Advice
Understanding the ins and outs of Inheritance tax can be overwhelming, especially at a time of dealing with the loss of a loved one. Contact Financial Foresight today for trusted inheritance tax advice that will give you and your family peace of mind.
