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In 2017, £5 billion was paid in inheritance tax. That represents the highest amount ever raised from UK taxpayers. However, although the number of people paying inheritance tax is rising, most people still won’t have to cover this cost. Currently around 30,000 estates are subject to inheritance tax each year and the rest don’t meet the threshold. That’s not to say that this won’t change – particularly given the increases in the values of property over the past decade, many more people could soon leave behind an estate of enough value to meet the minimum threshold for inheritance tax. So, what can you do to legally avoid or reduce that potential bill?
£325,000 – this is the base figure that can be passed on without attracting any inheritance tax for an individual. This jumps to £650,000 for couples who are married or in a civil partnership. If you’re a couple passing on your home then the addition of the Main Residence Allowance means you have an extra £125,000 to create a total individual allowance of £450,000, or joint allowance of £900,000. Once your estate passes the threshold, inheritance tax is due at 40%.
Although there are many different complexities involved in inheritance tax, perhaps the most important step to take if you want to ensure your estate avoids it is to make a Will. If you die without a Will then you die intestate and you will have no control at all over what happens to your assets when you die. That means that it’s impossible to do any estate planning or make smart decisions that could help you to reduce or avoid an inheritance tax burden.
Inheritance tax isn’t inevitable for everyone. However, if your estate is affected it’s worth taking the time to try and reduce your liability.
Amanda Gillam is Solution Loans's General Manager and has been since 2009. She is also a prolific writer on personal finance issues, and has been quoted numerous times in articles published on 3rd party websites and in press releases. Her...Read about Amanda Gillam
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