Inheritance tax: Households face £200,000 IHT bill – how to save via freebies | Personal finance | Finance

Inheritance tax is a levy on someone’s estate from someone’s estate, which includes their money, property, and possessions, after their death. The value of someone’s estate must be below the £325,000 threshold for someone not to have to pay this tax. However, those who do can reduce what they have to pay by making donations, a popular tax-saving measure.

Gifts to married partners are exempt from IHT, meaning a deceased person can pass their estate to their spouse.

If a wife dies and leaves the entire estate to her husband, he can add her £325,000 allowance to his own tax-free allowance.

However, if the estate is valued at £300,000 and left to another family member, her husband will only be able to claim the remaining part of £25,000.

With respect to donations to children, as long as the deceased person lives more than seven years after making this donation, their children or family will not have to pay IHT on the donation after their death.

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However, if the parent dies before then, the children will likely have to pay inheritance tax on the gift, but the rate is determined based on how long after the gift they died.

Additionally, charitable donations are also a recognized IHT savings measure that people decide to use.

This practice can also reduce the rate at which inheritance is due from the current rate of 40% to 36%.

Alex Davies, CEO and Founder of Wealth Club, described the detrimental effect of IHT on someone’s legacy and family.


Mr Davies explained: ‘Inheritance tax is really the gift that keeps on giving – at least to the Treasury.

“With the pace of house price growth still near double digits, it’s no wonder so many households are being pushed above the IHT threshold.

“The average family hit by inheritance tax is now thought to face an average tax bill of £200,000.

“There are perfectly legal and legitimate ways to reduce your inheritance liability with a little careful and early tax planning.

“Writing a will in such a way that you are obligated to review and resolve any issues your estate may face, and to keep it regularly updated to reflect any change of heart or circumstances should be a priority for everyone. world, married or not.”

On the subject of donations, the financial expert shared how this tax-saving measure can significantly lower someone’s bill.

He added: “Give money early. Gifts taken from regular income, which are not deemed to affect the standard of living of the donor, are exempt from inheritance tax on day one, as are some smaller gifts.

“Timing is key because you can give unlimited amounts, but it usually takes seven years to be completely free of inheritance tax.

“Of course, once you give the money, you lose control. If you need it in an emergency, that’s not an option.

Recent government statistics revealed that IHT revenue reached £0.5billion in April 2022 according to HMRC.

That’s £10m more than the same period a year earlier, meaning many people are being pulled into the inheritance tax threshold and may choose to donate in the near future.

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