5 tips to reduce your Inheritance Tax bill
If you have worked hard all your life to accumulate your wealth and have duly paid your tax, the last thing you want is to pay even more tax when you die.
Over £7.5 billion was paid in Inheritance Tax (IHT) last year (2023/2024); a hefty chunk of people’s lifetime wealth and their descendants’ inheritance paid to HMRC.
Luckily, there are some very simple steps you can take to reduce your IHT bill.
Write a Will
Take advice about your Will. Many people think Wills are straightforward documents that anybody can write, but how they are written can make a difference to how much tax you pay. For example, if you are married and you have a Will that passes everything to your spouse you benefit from the spousal exemption and there is no IHT payable on first death. The surviving spouse can then carry forward the unused NRB and RNRB for use when they ultimately pass away.
Don’t rely on the Rules of Intestacy, it is likely these will not be suitable or achieve what you want.
Make full use of the RNRB
The introduction of the Residence Nil Rate Band (RNRB) in 2017/2018 has resulted in a reduction of IHT for thousands of households. However, it is important to take specific and accurate advice on how to pass your Estate on after your death and specifically to make use of the new RNRB allowance relating to your home. There are many ways this can be incorporated into your estate planning so that it works best for you.
Use your Gifting Allowances
There are many Gifting Allowances that are underused. The link below lists them in more detail. However, gifting should be discussed as part of your overall Financial Plan to ensure it does not have an impact on other areas of your finances.
Trusts should also be considered for larger lump sum Gifts that are subject to the 7-year Gifting Rules.
Don’t forget your Pension
Pensions pass to your beneficiaries free from IHT, so consider if income can be taken from elsewhere rather than from your Pension. This will mean the Pension can be preserved for your beneficiaries. Pensions are extremely complicated, so make sure you get professional advice on your individual situation.
Skip a generation
Skipping a generation and leaving cash to grandchildren reduces the risk of being taxed twice.
The underlying message here is that there are many options open to you to potentially save IHT, but make sure you get advice specific to you and your situation. This will ensure you get the best tailored solutions to suit your needs.
Watch our latest video on IHT Planning for more advice:
Professional Advice is only a call away
At Redwood, we understand that every Clients needs are unique and we have a range of IHT Planning solutions which are specifically designed to cater for your circumstances and achieve your aims.
We are pleased to offer a Complimentary 15 Minute Phone or Video Meeting with an Adviser to help you understand the potential options open to you before you start to explore the details, risks and benefits that underpin these option.
Call us on 01489 877 547 to book an appointment, or Request a Call Back from the team here.
