March 10 2014 Latest news:
Ed Foss, Senior writer
Thursday, November 18, 2010
It is not a tax which will bother many average or below average earners.
But for those it does have an impact on, it can see a significant amount of money taken out and given to the exchequer.
The level at which inheritance tax kicks in has been set to stick at £325,000 for the next four years.
The freeze will act as an effective tax rise because of the effect of inflation.
Over and above £325,000 tax is payable at 40pc.
So how to get round the rules legally? There are various ways according to quite how far you want to go and what level of wealth you have to ‘protect’.
But here Lindsey Sharples, Associate Solicitor in the Wills and Probate team at Steeles Law, gives her view on how to save on inheritance tax following the four year freeze.
“There is no need to resign yourself to paying a large percentage of your estate in tax,” said Mr Hussain.
“There are several things that people can do during their lifetime to reduce the inheritance tax burden.”
• Make a will. If you fail to make a will, then your estate will pass under the intestacy rules which means you will have no control over where it goes. If your husband or wife survives you, they will not necessarily receive the whole estate and this can lead to liability for inheritance tax.
• Use your annual allowance of £3,000. Everyone can give away up to £3,000 per year without it affecting their inheritance tax. If the previous year’s allowance has not been used in full, the unused part can be carried forward giving a potential £6,000.
• Make gifts to charities (or political parties). Gifts to charities are fully exempt from inheritance tax whether they are lifetime gifts or gifts in a will. Make sure the charity is established in the UK, if the charity is based overseas the exemption will not apply. Gifts to political parties are also exempt.
• Gifts to children on marriage. Parents can give up to £5,000 to a child on their marriage in addition to their annual allowance of £3,000. This applies to each parent, so £10,000 for a couple.
• Regular gifts from income. If your income exceeds your outgoings, you can make regular gifts of income without affecting your inheritance tax position. There is no limit on the size of the gifts but they must be from income and not capital, they must not reduce your standard of living and you must intend them to be regular.