Inheritance tax in the UK is a tax on the assets and valuables you still own when you die. With a tax rate of 40% this means a little under half your estate will be taken by the tax man. More importantly, if your estate comprises mainly of property and assets and very little cash. Some of your estate will need to be sold to raise the cash to pay the tax man.
This article summarises the major principles / allowances in minimising your Inheritance tax bill.
- Make sure that when you die, everything you personally own totals less than the nil tax band of £325,000 estate plus £175,000
- Gifts between husband and wife are tax free, so pass assets to the partner likely to live the longest.
- Gifts to charities are tax free.
- Make gifts of £3,000 each tax year.
- Make small gifts to different people of £250 each tax year.
- Gifts on Marriage £5,000, £2,500 & £1,000.
- Gifts of any asset made more than 7 years before you die.
- Ensure someone else, usually your children takes out life insurance sufficient to cover the tax bill on your death.
The key to reducing inheritance tax is advance planning. Don’t delay.