A
recent study has found that the UK and Ireland have the highest
inheritance tax rates in the developed world.
In
the UK if you're estate exceeds the threshold £325,000 then 40%
inheritance tax will be charged on anything above that value. Meaning
an £1.8m estate would see 32.9% taken away for tax, compared to the
European average of 14% this is considerably higher.
Rising
house prices mean more and more people will be liable to pay
inheritance tax over the coming years.
However
there are some ways to significantly reduce the level of inheritance
tax your estate is liable for.
1. A gift to your partner
As
long as you are both permanent UK residents, then you can make
tax-free gifts to your spouse or civil partner. When you pass away
anything you give to them will not be counted as part of your estate.
2. Give to family and friends
If
you give something to a friend or family member, the value of the
gift will only be liable for inheritance tax for seven years. For
example, if you give a family member a sum of money and live for
another seven years then inheritance tax will not have to be paid on
the value of the gift.
3. Invest in a trust
If
you invest cash or property into a trust which neither you, your
spouse or children under 18 benefit from then they are no considered
to be part of your estate therefore no longer liable for inheritance
tax. For example, you set up a trust to pay for your grandchild's
education the value will not be eligible for inheritance tax.
4. Give something to charity
Inheritance
tax will not be charged on anything you leave to charity, so you can
reduce your inheritance tax bill and donate to a good cause at the
same time. Also if at least 10% of your estate is left to charity,
only 36% of your estate over £325,000 is liable for inheritance tax
rather than 40%.
5. Life insurance
Although
taking out life insurance will not reduce the amount of inheritance
tax your estate is liable for, the payout may make paying the bill
much more manageable for your family members. For example, having
this extra cash available when you pass away could save your family
from being forced to sell the family home to afford the tax on your
estate.
Many
of these ways to cut inheritance tax can not be achieved without a Will. Therefore it is important that you have one in place to
ensure you can provide as much as possible for your friends and
family should you pass away. If you have not made a Will, ConsumerCare can help you by providing a professional Will at a fraction
of the price that the average solicitor would charge.
