With the help of Slater Financial I can relax safe in the knowledge that my savings are working hard for me.

Julie Carter

Inheritance Tax: Reducing Your Liability

July 15, 2016

Inheritance Tax is an important obligation that every liable individual must consider. This tax type is due if an individual’s estate – which consists of property, money, possessions or all of the above – is valued at £325,000 or more when they pass away. This Inheritance Tax threshold is at its highest rate since the tax was introduced in 1986, when it was presented as a replacement for Capital Transfer Tax.

Who pays Inheritance Tax however is dependent on a selection of factors, and as with any tax liability there are a number of exceptions that may see the amount you owe reduced or may alternatively mean that you are eligible to pay other taxes, such as Income Tax or Capital Gains Tax. We provide Inheritance Tax advice throughout Derbyshire and actively guide people on how they can reduce the taxman’s stake in their respective estates.

Gift to those closest to you

Whilst there are differing rules on gifting your estate to your partner and to your family or friends, giving away your assets is one of the most popular ways in which you can reduce your Inheritance Tax liability. You can choose to give away your estate or part of your estate to the individual that you are married to or in a civil partnership with. As a result you will not pay Inheritance Tax on the estate that has been gifted.

Giving part or all of your estate as a gift to family members or friends however is different. The value of this gift will still be taken into account when calculating the amount of Inheritance Tax due but only for a total of seven years.

Give your assets to charity

Charitable giving actually reduces the rate of Inheritance Tax that applies to the proportion of your estate that sits above the £325,000 threshold, however you must leave at least 10% of your estate to charity. If you give part of your estate to a good cause the Inheritance Tax you are liable to pay is calculated at 36% instead of the usual rate of 40%.

Become a grantor

Establishing a trust that you, your partner or any dependents under the age of 18 can benefit from is another way to reduce the amount of Inheritance Tax paid, however, by taking this route you may be eligible to pay Capital Gains Tax.

*This article does not constitute financial advice. Slater financial strongly advises you to seek professional advice before making any financial decisions.*