Mitigating inheritance tax

House key


Recently published government statistics have shown that increasing house prices have increased the amount received in inheritance tax.  During the year ended 5 April 2016, receipts from inheritance tax rose from £3.80 billion in 2014/15 up to £4.65 billion in 2015/16.

The statistics also show that the increase in property values are resulting in more and more estates becoming liable to this tax.

What can you do to minimise your exposure to this tax?

First of all you need to ensure you have in place an up to date valid Will. Dying without making a Will can mean having to pay more inheritance tax than is necessary as the government have set out rules as to how estates are dealt with where no Will has been made. These rules do not take advantage of all the reliefs and allowances you could be entitled to.

Consider making lifetime gifts

Any gifts made more than 7 years before you die are generally not liable to inheritance tax. There are no limits to the amounts you can give away directly to an individual. Be careful however with what you gift as although inheritance tax may be avoided you may create an immediate charge to capital gains tax.

Consider a lifetime gift to a trust for the benefit of children and grandchildren

A trust will have its own nil rate band and will pay inheritance tax every 10 years at a much reduced rate if the value of the assets have grown to exceed the nil rate band. It is rumoured that the use of trusts by the Duke of Westminster has reduced the inheritance tax bill on his £9 billion estate by nearly £3 billion as most of his estate was held in family trusts. Using trusts can also avoid an immediate charge to capital gains tax as it is possible to defer capital gains tax until the asset is ultimately sold.

Consider leaving a proportion of your estate to charity

If you leave at least 10% of your Estate to charity then the inheritance tax rate reduces from 40% down to 36%.

Consider investing in inheritance tax efficient assets. If the asset qualifies for either Business property relief or Agricultural property relief then there will be an effective exemption from inheritance tax as the relief available is currently 100% in certain circumstances once you have owned the asset for 2 years.

For advice on this topic, please get in touch with Robert Peel, or fill in our contact form below: 


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