Here we talk about five ways to help reduce your inheritance tax billThe importance of reducing your inheritance tax bill cannot be overstated as, by doing so, you will leave as much as possible to your loved ones – helping them achieve their hopes and ambitions in your memory. The good news is that by planning ahead, you can cut your inheritance tax bill with relative ease and effectiveness – whilst also ensuring you can still enjoy your retirement.
What Is Inheritance Tax?Inheritance tax is the amount of tax liable on a person’s estate when they die. It usually falls to the family to pay this bill and naturally reduces the amount of inheritance for loved ones. Currently, an individual’s inheritance tax allowance is £325,000. This means that an estate valued up to this amount is not liable for tax. This allowance can be transferred between spouses, enabling a married couple to gift £650,000 tax-free when they die. Anything over this amount is subject to 40 percent inheritance tax. There are a few exceptions to this so-called nil rate band – gifts between married couples or civil partners, and gifts to a UK registered charity, of any value, are not liable to inheritance tax. Certain business property and farming property are either not taxable or subject to a reduced rate of tax. From 6 April 2017, there will be an additional nil rate band when a residence is passed on death to a direct descendant, increasing initially by £100,000 and then in annual increments of £25,000 up to £500,000 by 2021. Despite the inheritance tax allowance set to increase from next year, it’s still a good idea to take steps to reduce your tax bill so you can maximise the tax-free amount.
How To Reduce Your Inheritance Tax Bill
- Give Gifts
- Make A Will
- Pension Payments
- Life Insurance