Inheritance tax: Ensure loved ones aren’t left with ‘nasty surprise’ | Personal Finance | Finance



Inheritance can be a tricky area of ​​financial planning, and can be a source of confusion for many. Jeannie Boyle, Director and Chartered Financial Planner at EQ Investors, explained some of the key issues for Britons to consider when it comes to inheritance tax (IHT).

How much can people leave?

“With rising property prices bringing even modest homes into the inheritance tax net, careful planning may be required to ensure that your loved ones aren’t left with nasty surprises when you pass on your estate.

“IHT is paid at 40 percent on the value of your estate – your property, money, and possessions, over £325,000 (the nil rate band).

“Married couples and civil partners can leave up to double this (£650,000) IHT-free.”

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Make a Will and Lasting Power of Attorney

Ms Boyle said: “Many people do not think about writing a will until later in life, but especially for those with children we recommend doing this as soon as possible. If you do not make a will then your estate will be distributed according to the rules of intestacy.

“Remember that these rules do not recognise unmarried partners: if you’re not married or in a civil partnership, then your partner won’t receive anything from your estate (that is not jointly owned by them) unless this is specified in your will.

“You should review your will if your circumstances have changed: for example, marriage can invalidate an earlier will.

“You can help your family by sharing your plans with them. You may even find that they suggest something different! Setting up a Lasting Power of Attorney at the same time will ensure someone you know can deal with your affairs if you lose capacity.”

Make use of exemptions

There are several allowances for gifts which are automatically exempt from IHT, and Ms Boyle outlined some of the options.

She said: “Every year you can gift £3,000. This allowance can be carried forward one tax year if unused.

“You can make unlimited small gifts of £250.

“Gifts between spouses or for the maintenance of children, ex-spouses or dependent relatives are also exempt.

“Gifts to people getting married are exempt: up to £5,000 for your child, £2,500 for your grandchild or greatgrandchild, and £1,000 for anyone else.”

Gift to a charity

Ms Boyle concluded: “Many people choose to make charitable gifts in their wills.

“Although not always considered part of estate planning, such gifts can reduce the inheritance tax (IHT) rate on death from 40 percent to 36 percent if used in the correct way.”


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