Inheritance Tax planning – a guide to smart giving

In the complex landscape of planning for your family’s future, it’s essential to explore opportunities that not only preserve your wealth but also ensure a seamless transition for your loved ones. One critical aspect is Inheritance Tax (IHT) planning, where strategic decisions can significantly impact the legacy you leave behind. Below are some options and […]

In the complex landscape of planning for your family’s future, it’s essential to explore opportunities that not only preserve your wealth but also ensure a seamless transition for your loved ones. One critical aspect is Inheritance Tax (IHT) planning, where strategic decisions can significantly impact the legacy you leave behind. Below are some options and reliefs for reducing your taxable estate during your lifetime.

Small Gifts

You can make small gifts of up to £250 IHT-free to as many individuals as you like each year, provided you have not used another exemption on the same individual.

Annual Exemption

The annual exemption is £3,000, allowing you to gift this amount free of IHT annually. Any unused allowance can be carried forward for one year.

Gifts from Surplus Income

This exemption allows you to gift surplus income IHT-free, provided it forms part of your normal expenditure and leaves you with sufficient income to maintain your standard of living. Keeping detailed records is essential to demonstrate this pattern of giving.

Spouse/Civil Partner Exemption

Transfers of assets between spouses or civil partners are IHT-free, with the exemption applicable as long as the couple remains married or in a civil partnership. However, there is a £325,000 limit when the transfers are made by a UK domiciled donor spouse to a non-domiciled donee spouse.

Gifts to Individuals & Seven-Year Rule

Gifts to individuals not covered by exemptions are exempt from IHT if the donor survives for seven years after making the gifts. Taper relief is available if the donor survives for more than three years.

IHT Efficient Investments

Business Property Relief (BPR) and Agricultural Property Relief (APR) are valuable reliefs to minimise IHT if certain conditions are met.  BPR provides either 100% or 50% relief on qualifying business assets held for at least two years while APR provides relief at either 100% or 50% on the agricultural value of qualifying agricultural property again after as little as two years of ownership if other qualifying conditions are met.

These are just a few simple options to consider for IHT planning. If you are interested in reducing IHT on your estate or that of a family member, please contact Sandy Gaywood on 01633 653150 or sandy.gaywood@kilsbywilliams.com or your usual advisor on 01633 810081 or email info@kilsbywiliams.com to discuss how we can help.

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