Inheritance tax has a 40% tax rate and applies to the estate that crosses the tax-free threshold. When a person dies, they want their estate to go to their spouse, children, or grandchildren.
According to inheritance tax laws, an estate that passes to UK-domicile or deemed-domicile spouse or civil partner is already tax-free. But what about the children and grandchildren? Read on to find ways from inheritance tax advisors to avoid it!
1. Make a Will
A will is essential to estate planning and the easiest way to avoid inheritance tax. Without a will, assets are distributed according to intestacy rules, and inheritance tax will be applicable over the threshold. If you’re concerned about who inherits what when you die, you must prepare a will beforehand. Any assets or gifts left to a spouse or civil partner will already be tax-free.
2. Keep the Assets Value Below The Threshold
In the tax year 2022/23, the inheritance tax nil-rate band or the threshold is £325,000 and will remain this way till 2026. So the easiest way to avoid inheritance tax is to keep your assets below it. The nil-rate band is transferable to a spouse, increasing the spouse’s nil-rate band to £650,000. In addition, the main residence transferable allowance is £175,000, and the sum of all thresholds helps a married couple pass up to £ 1 million without any IHT.
3. Give the Assets Away
If you give your assets away to family, charities, amateur sports clubs, or political parties and survive for at least seven years after, you’ll be inheritance tax-free. Even if you were to die within those seven years, the inheritance tax would be paid on a reduced scale. You can also gift assets up to £3,000 in value and gift your children £5,000 at their wedding without tax.
4. Put the Assets in a Trust
Assets put in a trust before someone’s death don’t form a part of their estate which means they will avoid inheritance tax. You could place the assets in a trust for children or grandchildren until they turn 18. Trusts are a good way to save tax and control your assets. Additionally, if you place assets into an ‘interest in possession trust,’ you can also make an income on those assets. An inheritance tax specialist will be a better guide on avoiding tax through a trust.
Inheritance Tax Advisors London and Walsall
People work hard their whole life to create assets and leave them behind for their families so they stay financially secure. However, it’s subject to a high tax rate when it crosses the threshold. Fortunately, there are ways to reduce it or avoid it completely.
If you want to protect your assets correctly, contact professional inheritance tax advisors in London at IBISS & CO. It is a tax accountant consultation service in London and Walsall that offers business and tax advice. So whether you’re figuring out how much taxes to pay on dividends, dealing with inheritance tax problems, or want to know how to file self-assessment and tax returns, they can help.
Contact them and get more information directly from the best inheritance tax specialists in London.