It’s that time of year once again to focus on our love for our families and friends and think about what lovely gifts we can treat them to. If you are entering your later years, it can also be a good time to think about how gifting can help reduce your inheritance tax liability. Any individual’s inheritance over £325,000 is subject to tax (doubling for married couples), but there are ways this can be reduced such as the new residence allowance, trusts, lifetime mortgages, pension drawdowns, business property relief and life assurance.
One key method regularly used is gifting. You can gift any amount to a loved one and it won’t be liable for inheritance tax as long as you live for another 7 years. If you don’t think you’ll live for another 7 years then you still get an annual gift allowance of £3,000 a year which is exempt from tax, as well as as many additional gifts of up to £250 to as many additional individuals as you want.
The gifts could be funded by savings or investments, or through options such as lifetime mortgages (also known as equity release) whereby you release money from your home to gift to others thereby reducing the size of your estate when you pass on.
It can all seem like a bit of a minefield especially as the regulations often change, which is where a financial adviser comes in. At Beacon IFA our experienced team create succession plans best suited to each family’s circumstances, working first to understand their current and future monetary needs. Our aim is to ensure that the money that you’ve worked hard to accumulate doesn’t simply get taxed away.