Inheritance tax threshold under fire: How you can legally lower the IHT bill | Personal finance | Finance

More families are being dragged into the IHT net every year as the threshold for paying the tax has not been raised by £325,000 since April 2009. However, Britons can act now to ensure they pay as little inheritance tax as possible to HMRC.

HMRC figures for inheritance tax receipts in March have been released, confirming what many already knew.

More and more middle-income people are having to pay inheritance tax – a tax that was once only for the “really rich”.

Rising house prices are to blame, along with tax thresholds that are “no longer fit for purpose” according to financial experts at Bowmore Financial Planning.

Campaigners against the tax say the thresholds for inheritance tax have remained the same since 2009 – despite house prices rising dramatically.

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Ms Millen thinks the government should consider raising the threshold in line with inflation ‘to ensure that normal middle-class families are able to pass on their wealth without being taxed unnecessarily’.

Inheritance tax (IHT) of 40% is usually paid when a person’s estate is worth more than £325,000.

A zero-rate residency bracket was introduced in 2017, which allows an additional £175,000, provided residential ownership is left to direct descendants.

However, the number of properties sold for over £500,000 is increasing every year.

These properties accounted for almost a fifth (17%) of all sales in England and Wales in 2021, up from 11% two years earlier.

There are tools and calculators on the Gov.uk website to help people calculate their tax and potentially pay less.

It might also be beneficial to speak to a financial adviser who could save people money by helping them take advantage of any legal loopholes.

Generally, there are 10 inheritance tax loopholes that Britons should be aware of before filing their tax returns.

10 inheritance tax loopholes

  • Talk to parents or grandparents about putting the property in trust
  • Make sure they know the exemptions for business owners
  • Donate part of it (above the threshold) to charity
  • Gift up to £3,000 to tax-free family and friends
  • Donate assets seven years before they die? Encourage them to spend it well before they die
  • Make the most of Wedding Gift Allowances (up to £5,000)
  • Buy a funeral plan
  • spend it
  • Beware of inheritance tax thresholds
  • Speak to an independent financial adviser.

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