If you have worked hard, saved and taken care of your finances over the years, the likelihood is that you will have a healthy portfolio of assets. And rather than leaving them to the tax man, you will probably want to ensure that you can leave your loved ones as much of your estate as possible when you’re gone.
With some careful inheritance tax planning and the advice of financial experts, you can avoid a significant amount of tax, and give your family more of what you leave behind.
The Facts and Figures
The current threshold for paying inheritance tax is £325,000, or for a couple, £650,000. Any assets bequeathed that exceed this value will be subject to inheritance tax from HMRC – which is currently 40 percent of all funds over that threshold.
Without intervention and some careful planning, your estate will definitely be subject to the full amount of tax. However, enlisting the help of a financial advisor will mean avoiding inheritance tax is a very real possibility.
Simple Ways to Avoid Paying Inheritance Tax
The simplest and quickest way to ensure that your estate isn’t eaten up by inheritance tax is to gift assets during your lifetime. The current rules allow you to give away up to £3,000 whilst you’re still alive before being liable for inheritance tax. Or you can give friends and relatives up to £7,000 – provided you live for at least seven years afterwards.
If you own a house, it may be possible to give that away whilst you’re still alive. However, it cannot remain your main residence afterwards, and the same seven year rule applies. Other relatively simple methods of inheritance tax avoidance include setting up a trust and donating more than 10 percent of your estate to charity.
Specialist Tax Avoidance Products
Investment specialists often offer specific tax avoidance products – designed to preserve as much of your estate after you die as the law allows. There are now some innovative products that lead to inheritance tax exemption after just two years – the only requirement is that you still have your investments at the time of your death.
An inheritance tax service can preserve your capital whilst delivering an impressive 3 percent return each year. There is also a product called the AIM Inheritance Tax Service, which delivers excellent returns through investment in smaller companies.
If you are interested in opening an ISA, you can avoid a significant amount of inheritance tax by investing in an account linked to the Alternative Investment Market. And you can stay in control of your capital by investing in an accelerated discounted gift trust, which splits your funds between a gift trust and an investment in information technology software (ITS).
Of course, the majority of inheritance tax avoidance schemes are investments, so they have an element of risk associated with them. However, a reputable financial advisor will outline the risks fully before you commit to innovative avoidance schemes.
How much you can save and the options open to you will very much depend on your personal circumstances, as well as changes to the rules and regulations that govern inheritance tax. However, with experienced and capable financial experts by your side, you can stay one step ahead of the UK tax system.