Inheritance tax warning: ‘middle-income’ Britons set to pay a heavy bill – act now | Personal Finances | Finance


Middle-income families are heading for the 40 percent inheritance tax bracket due to rising house prices and the five-year freeze on IHT brackets. The combination of these two elements means that unsuspecting individuals will find themselves pushed above the tax exemption threshold. In fact, the Office for Budget Responsibility has predicted that the number of additional people reaching the threshold will rise to more than 41,000 per year by 2026.

As a result, many people hope to find ways to legally reduce their liability.

Samantha Warner, Product Manager at, spoke exclusively to and shared some tips to help Brits alleviate an inheritance tax bill.

First, Ms. Warner recommended transferring the assets that a person holds into a trust.

This is because they will not be part of the person’s estate, thus reducing the IHT liability.

READ MORE: State retirees urged to verify eligibility for ‘benefit’ worth £ 3,000

A next action is to dismantle the zero rate residency tranche (RNRB), an essential reduction for inheritance taxes which concern property.

Ms Warner explained, “If you separate the RNRB, you can protect it for the direct line descendants and the rest of the estate can be put in trust.

“It can help with tax planning in families – if a person puts their estate in a trust rather than leaving it directly, the family can benefit from the trust while they are alive, but the assets will not be part of their estate at the time. death and can help keep the death estates of family members below the applicable tax thresholds.

“Splitting the RNRB makes it possible to offer it directly, thus taking advantage of the full value of this allocation to the extent possible. “

Inheritance tax warning as unmarried Britons face a bill in the thousands [EXCLUSIVE]
DWP update: new program can support people with disabilities with £ 62,000 [ANALYSIS]
State retirees will receive cash bonus in time for Christmas [INSIGHT]

A third way for someone to reduce their inheritance tax is through the Lifetime Gifting process.

Lifetime gifts can help Britons reduce the size of their estates on death, especially if a system is in place, Ms Warner said.

Gifts are generally exempt from the IHT as long as a person survives the gift for seven years.

However, if the donor does not survive the seven-year period, then the donation becomes a potentially exempt transfer failure. This means that the IHT is billed, albeit at a declining rate on a decreasing scale.

Setting up a program to donate part of the value of an estate is considered a good way to insure against IHT liability.

Ms Warner also recommended that Britons study the idea of ​​leaving part of their estate to charity when they die.

The inheritance tax bill will not include anything that a person decides to leave to charity.

It could be a win-win, allowing Britons to support a cause close to their hearts, while lowering their estate bills.

Ms Warner pointed out that leaving at least 10 percent of an estate to charity comes with bonuses as well.

This is because the rule states that if this is done, the IHT rate on the remaining assets is reduced from 40 percent to 36 percent.

Finally, the fifth tip for alleviating an inheritance tax bill is about using flexible life interest trusts.

Ms. Warner said, “Flexible life interest trusts allow a beneficiary to receive income from the trust for life.

“These trusts can be structured so that capital can also be offered, reducing the size of the asset over the lifetime.”

Generally speaking, if a person is worried about inheritance tax or wishes to make decisions to reduce their bill, they are invited to consult experts.

This is especially the case with more complex ideas around tax planning, such as the use of trusts.


Comments are closed.