To reduce or avoid inheritance tax, individuals will need to take action to ensure their affairs are in order. It can be difficult to know where to begin, and so Express Money has highlighted six key tips and tricks to help.
Gifting can perhaps be one of the best ways for Britons to avoid being hit with a hefty tax bill on their death.
The action helps to reduce the value of a person’s estate for inheritance tax purposes, and gifts can vary.
- Household and personal goods, for example, jewellery or furniture
- A house, land or buildings
- Stocks and shares on the London Stock Exchange
- Unlisted shares held for less than two years before the person’s death.
If a person survives for seven years from making the gift, it will fall outside of an estate and there is no inheritance tax liable.
Dying within seven years of the gift being made means a proportion of the gift, or indeed all of it, will be subject to inheritance tax – on a taper scale. This is commonly referred to as the seven year rule.
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Inheritance tax does make room for some allowances to help people reduce their inheritance tax liability.
For example, people will not pay IHT on the first £325,000 of their estate, known as the nil-rate band.
If a person gives away their home to their children or grandchildren, their threshold can increase to £500,000.
There is normally no inheritance tax to pay if either:
- The value of the estate is below the £325,000 threshold
- Everything above the £325,000 threshold is left to a spouse, civil partner, a charity, or community amateur sports club.
Pensioners may be eligible for sum worth £3,500, Martin