3 Tricks to Avoid Death Taxes
Inheritance Tax is not popular. It is also surprisngly easy to avoid.
Inheritance Tax (IHT) is a deeply unpopular tax in the UK that can take up to 40% of your estates value on death and give it to the tax man. What with house prices soaring more people than ever are being caught in the inheritance tax net.
How To Reduce Your IHT Bill..
1. Give it away
You can give £3,000 away annually. This is called your annual exemption
You can gift £250 to as many people as you want. Do you want to give £250 to each of your 500 Facebook friends every year? That’s completely fine
You can gift money as a wedding gift (£5k to a child, £2.5k to a grandchild and £1k to anyone else)
You can make regular payments to anyone you like as long as it does not affect your own standard of living
The 7 year rule: Any other gifts you make are not taxable as long as you survive more than 7 years after you made the gift. You can read more about gifting here.
2. Don’t Spend Your Pension
Your pension is not included in the inheritance tax calculation. This means it can pass to your beneficiaries without being liable to IHT.
If you die before you are 75 then your beneficiaries get your pension tax free
If you die after you are 75 then your beneficiaries will have to pay income tax on any money they withdraw from your pension.
If you have a nice fat pension it might be sensible spending your savings first.
3. Life Insurance
It might sound silly but you can buy insurance that pays out on your death. You can take out enough insurance to cover your IHT bill. Not a bad idea right? Life insurance get more expensive the closer you are to death but it’s definitely worth looking at.
Talk to a Financial Adviser
If you have read this and want to learn more, we would definitely recommend talking to a financial adviser. Reducing your tax burden is one of the things they are really good at. Unbiased is a good website to start with. Alternatively ask your mates for a recommendation.
Until Next Time
The Wealth Gap
(None of this is financial advice)