Just like many other taxes, Inheritance tax allowances have been frozen. Data has revealed that IHT collected between April 2022 – February 2023 totalled £6.4bn, which is £900m higher than the same period the previous year, as a result of the Nil rate band (tax free allowance for inheritance taxes) remaining the same at the same time as house prices increasing.

How can you reduce your inheritance tax bill ? 

    1. Put it in a pension

Your pension could be used to pass on wealth as it is usually excluded from your estate for IHT purposes. Nominate beneficiaries for your pension so that should you pass before you receive it IHT normally isn’t payable.

    2. Give it away

The simplest way to pass wealth to loved ones is to just simply give it to them. Each year you are able to pass £3,000 to loved ones without it being liable to IHT if you hadn’t used the previous years allowance you can give £6,000. making regular payments to help another persons living costs, there is no limit to how much you can give as long as :

  • you can afford the payments are meeting your usual living costs
  • you pay from your regular monthly income

these include payments for things like childs rent / providing support for elderly relative, paying into savings account for child under 18

If you would like personal tax advise and support contact the office by phone or email click here to see how we can help.

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3. Special Purpose Vehicle company (SPV)

Due to the ability to transfer ownership easily an avenue worth looking at when you own multiple properties is an SPV. As an individual investor, you would usually be subject to Capital Gains Tax if you wanted to gift the property to a family member. For basic-rate taxpayers, this is charged at 18%, and 28% for higher- and additional-rate payers. If the property is held in an SPV however, the beneficiary can easily be added as a shareholder, to inherit the property at a later date. This can also help reduce your taxable estate for Inheritance Tax purpose

4. Trust’s or Family Investment Company (FIC)

By Setting up a trust you can keep your assets out of your estate, the trustees can control the assets rather than them being passed to the beneficiaries straight away. This helps for young children, however it is certainly worth seeking tax and legal advice before establishing one.

A FIC can be used to gift large sums in excess of the nil-rate band without incurring a lifetime charge to IHT.  The company will be controlled by the parents/grandparents and a trust can be used to hold some of the shares.  The beneficiaries of the FIC are usually children/grandchildren.  Unlike trusts, FIC’s are not subject to the 10-year charge rules.