Inheritance Tax: How Britons Can Lower Their Bills and Pass More Money on to Their Families | Personal finance | Finance
If a person’s estate is valued below this rate when they die, they will not pay any tax on it. Britons can, however, legally reduce the amount of inheritance tax their relatives pay to 36%. Donations and donations to qualifying charities are exempt from inheritance tax.
According to the rules, if a person leaves 10% or more of their net worth to charity, their relatives pay the reduced rate.
The legislation defines “donated to charity” as assets that are donated “if they become the property of charities or are held in trust for charitable purposes only”.
Along with this, the value of the charitable donations themselves are deducted before the imposition of inheritance tax.
This means that, in some scenarios, giving more to charity could actually lower a person’s inheritance tax bill and may mean that people have a little more to leave to their beneficiaries overall.
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However, this depends on the initial value of the estate, as well as the size of the gift.
People can donate a fixed amount, an item, or whatever remains after other gifts have been removed.
Donations to charities are exempt as long as they are made directly to a charity which they qualify as a charity under UK law or which is established in the EU or another specified country.
The charity must also be regulated in the country where it was established and it must be managed by “competent and competent persons”.
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If a person’s inheritance tax comes from the deferral of tax on woodlands or heritage assets, they cannot use the online tool either. The tax on forests or taxes on heritage is still 40%.
Britons are often asked to write a will so that their wishes can be fully granted when they die and with gifts they are warned that they should be aware of inflationary changes.
This is because people may give less than expected, which may affect their inheritance liability, as inflationary causes may cause the value of a person’s gift to increase or decrease.
This could mean that the amount someone is considering leaving may not meet that 10% threshold.
Official figures last month revealed HMRC raked in a further £2.4billion in inheritance tax revenue in the three months to July 2022.
That was £300million more than the same period in 2021.
Commenting on the figures, Wealth Club CEO and Founder Alex Davies warned that unless something changes more and more people will be forced to pay the tax.
He said: ‘The rise in monthly inheritance levies is due to soaring house prices and years of frozen benefits.
“With inflation soaring, the effect of the benefit freeze will only increase in the years to come, unless the new Prime Minister chooses to intervene.
“While only 4% of estates currently pay inheritance tax, without a review of the rules, more and more families will find themselves hit with inheritance tax they may not have expected.”