Individuals and families in the UK paid £3.14 billion in inheritance tax (IHT) in 2012/13, official figures from the Office for National Statistics have shown. It comes as a result of the freeze in the IHT threshold – held at £325,000 since April 2009 – and a recovery in property prices, which has pushed more families into IHT liability. HM Revenue & Customs collected eight per cent more IHT in 2012/13 than it did in the previous tax year.
Key facts
- IHT must be paid if a person’s estate is valued over £325,000 or £650,000 for a married couple or civil partners for the years 2013/14 to 2018 (provisionally)
- Assets or an estate, defined by HMRC, can include property, land, savings, investments, pensions, life insurance policies, businesses, motorcars, jewellery, antiques and foreign assets.
- The full rate of IHT is 40 per cent.
Ways to minimise your IHT liability
There are many legitimate ways to reduce your inheritance tax bill, but forward planning with the help of a professional adviser is essential. Some things to consider include:
- The transfer of assets: some gifts, such as any given to a spouse or partner providing they are permanent residents of the UK, are tax-free
- Giving gifts: individuals are entitled to an ‘annual exemption’ on gifts which allows them to give up to £3,000 away each year. Marriage gifts and small gifts, up to specified limits, fall into the exempt category, as do donations to charity or political parties
- Transferring the unused nil-rate band of a late spouse or civil partner to the surviving spouse after the first death
- Leaving your estate to charity: leaving at least 10 per cent of your estate to charity can reduce the IHT rate to 36 per cent on the remainder of the estate.
Talk to us about inheritance tax planning and about the different ways you may be able to reduce your inheritance tax liability. Contact John Elliot for more information.
