Last year receipts for the inheritance tax (IHT) rose to over 21% to £4.65 billion thanks to a rising stock market and property prices, and freezing of the tax-free allowance. Recent figures show that 19,277 estates were hit with IHT in 2013-14.
IHT allowance, the threshold above which 40% tax is payable, currently stands at £325,000 and has remained at that level since 2009. In the financial year 2017-18, a new additional alliance of £100,000 will be available and will rise further to £175,000 in 2020-21. However this will apply to the family homes of married couples with children. This will enable married couples with a huge property to pass on up to £1million to their children, IHT free. Single people, childless couples along with those who do not own a property are stuck on the existing threshold of £325,000.
Top IHT beating tips:
- Make a will which is extremely important for unmarried couple’s.
- Use your gift allowances. You can make IHT free gifts up to £3000 to anyone each year.
- Make regular gifts from your income as long as it does not reduce your standard of living
- Make use of the 7 year rule. You can give unlimited amounts of money or assets to anyone as gifts, IHT free as long as you live for 7 years after making the gift.
- Buying shares
- Take out a life insurance policy. Reduce the IHT on the estate by using “whole of life” in the insurance policy.
- Pass on your pension pot to a beneficiary makes it IHT free. Also if you demise before 75 years there is no income tax when the recipient starts relying on the pension pot.
- Remember charities in your will. Bequests to charities and political parties are exempt from IHT.