Use these inheritance tax exemptions to see more of your assets go to your loved ones and less to the tax man.
Inheritance tax weighs in at a hefty 40% for all assets over the £325,000 tax-free band. Those with significant assets may wish to start making tax-free gifts whilst they are still alive to ensure that their loved ones benefit as much as possible from their estate.
Here are five types of gift that can be given without incurring inheritance tax.
Gifts to spouses– There is no inheritance tax liability on gifts given between married partners and civil partners. It is possible to pass on your entire estate to your spouse without having to pay any inheritance tax.
Use your annual exemption– Everybody has an annual gift allowance of £3,000. This means that you may give away gifts of cash or assets up to the value of £3,000 during each tax year without them being liable for inheritance tax. Married couples each get their own allowance and unused allowances can be carried forward one year.
Give small gifts worth under £250– There is no limit to the number of gifts valued at £250 or less that you can give in any one tax year. The only restriction is that you cannot give small gifts to a person that has already received your entire £3,000 annual exemption.
Give to charities and political parties– Gifts of unlimited value can be gifted to charities and political parties (under certain conditions) without incurring inheritance tax. You can reduce your inheritance tax bill from 40% to 36% by gifting 10% of your total estate to charity in your will.
Give wedding gifts– Wedding gifts can be given without being liable to inheritance tax. There are limits in place as to how much the wedding gift can be worth before it is liable to inheritance tax, the limit will depend on your relationship to the recipient.
Need inheritance tax advice or help with estate planning? Get in touch with our team of experts here at Michael Bell for advice or to arrange a preliminary review.