Top 7 Ways to Legally Avoid Inheritance Tax – Your Guide by Inheritance Tax Experts
To avoid inheritance tax it requires careful planning and guidance from tax advisors in London. In this blog, we will outline some key strategies to for legal inheritance tax avoidance.
Press Release (ePRNews.com) - London, England, UK - May 23, 2023 - Inheritance tax is a complicated topic and you are most likely to be aware of the potential burden it can cause on the subject’s estate and their beneficiaries. To avoid inheritance tax it requires careful planning and guidance from tax advisors in London. In this blog, we will outline some key strategies to for legal inheritance tax avoidance.
Calculate the value of your estate
The foremost step you have to take for inheritance tax avoidance is to calculate the value of your estate.
There were the following assets while calculating inheritance tax-
- Your Investments
- Any other Assets
Subtract the following while calculating tax
- Value of the gift, if made
The final amount will help you decide how much inheritance tax you have to pay. After calculating if the estate value is more than £ 325,000 (which is the current Nil rate band in the UK) then you need to plan with your advisors strategies for avoiding inheritance taxes. It is pertinent that you keep the value of your estate in check regularly as it can change over time and may attract an inheritance tax liability in the future.
If you find it difficult to calculate inheritance tax by yourself, you can use an inheritance tax calculator or it is strongly recommended to hire an estate advisor who will calculate the exact value of your estate and the tax you have to pay.
Understand current IHT rules
It is pertinent to have a basic understanding of current IHT rules in the UK to take the desired steps to minimize tax on your estate. You have to pay no taxes in case the value of your estate is below £3,000 or in case you left the value that is over the £3,000 threshold to your spouse.
Pass your home to your loved ones
In case you leave your home to your spouse or civil partner when you pass away then you need not pay any IHT irrespective of your estate value. This rule also applies to any other assets that you leave to your spouse or civil partner.
But other than your spouse if you leave the home to any other person in your will, then it would count in your estate value.
Make a Will
Making a Will is one of the ways to avoid inheritance tax. Will ensure that your estates get distributed according to your wishes. In case you do not leave any will, then the estate would be passed according to the IHT rules and liable to inheritance tax. To reduce potential IHT bills and give your estate as you desire it is imperative to create a will.
Ensure to keep your inheritance tax below the threshold
The inheritance tax threshold or inheritance tax nil rate band is £325,000 in the year 2023 and would remain at that level until 2026. The nil-rate band of £25,000 is transferable to a spouse or civil partner on death that resolves in a total nil-rate band of £650,000 for couples.
Leave money for charity
If you leave your money to a charity registered in the UK, then this could be one of your options for avoiding inheritance tax. You could gift to political parties or local sports clubs. One of the points to be noted here is that if you leave more than 10% of the taxable estate to one of the charity groups in your will then the inheritance tax rate would fall from 40% to 36%.
Inheritance tax is a complex subject that requires careful consideration for its avoidance. Following the mentioned ways in the blog could help you to minimize inheritance tax and pass on the estate to your beneficiaries as you desire.Source : avoid inheritance tax