Graham Southorn shares inheritance tax tips
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Inheritance tax is usually charged at 40 percent of somone’s estate on anything above £325,000 although the threshold is raised to £500,000 if property is left to children. However, Britons who leave at least 10 percent of their estate to charity could make savings if they qualify to pay inheritance tax at a reduced rate of 36 percent according to HM Revenue and Customs (HMRC).
While inheritance tax is perhaps Britain’s most hated tax, there are plenty of things people can do to ensure their loved ones pay less.
Making the most of all the tax breaks available to them could save their children and grandchildren thousands of pounds.
Thousands of Britons leave a part of their will to charity every year which could work out in their family’s favour when it comes to paying inheritance tax.
Some £1.7bn was donated to charity by more than 10 thousand people through wills in the most recent year, figures from wealth experts Boodle Hatfield show.
It pays to be generous – people who donate at least 10 percent of their estate could have four percent less inheritance tax to pay to HMRC.
HMRC has an online calculator on its website where people can work out exactly how much of a saving this would be for their loved ones.
The calculator can be used to work out the amount needed to qualify for reduced IHT rates when preparing a will.
It can also be used by the executor of the deceased’s will or administrator of their estate if the death was after April 6, 2012.
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However, the calculator is not available to use if the deceased passed before April 6, 2012.
To use the inheritance tax calculator, people will need to know the value of the assets in the estate and the value of gifts the deceased made in the seven years prior to death.
Gifting assets before a person dies can significantly reduce how much inheritance tax will be due on their estate as long as it is made seven or more years before their death.
Graham Southorn from Maplebrook Will Writing Bristol told Express.co.uk there are three key things Britons can do while they’re still alive to ensure their loved ones aren’t left with a hefty tax bill.
Mr Southorn said: “There are three ways to reduce your inheritance tax bill or reduce the mount of tax your beneficiaries will have deducted from their inheritance. One is to get a well written will.”
As well as making sure someone has a will in place, the will writer also recommends making the most of gift allowances and considering investing in a life insurance policy to pay off the bill.
Britons can give up to £3,000 to family and friends every tax year tax free and carry allowances over from previous years.
If someone is getting married they can give them a further £5,000 tax free without incurring any penalties.
10 ways to pay less Inheritance tax to HMRC:
- Talk to parents or grandparents about putting the property into trust
- Make sure they know about Business Owner Exemptions
- Donate a part of it (above the threshold) to charity
- Gift up to £3,000 to family members and friends tax free
- Give away assets seven years before they die? Encourage them to spend it well before they die
- Make the most of wedding gift allowances (up to £5k)
- Buy a funeral plan
- Spend it
- Be mindful of inheritance tax thresholds
- Speak to an independent financial adviser.
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