Families Risk Paying Too Much Inheritance Tax1st Mar 2022
Many bereaved families are paying too much Inheritance Tax (IHT) because they failed to plan ahead, warns leading Dorset law firm Coles Miller.
IHT has been dubbed a ‘voluntary tax’ because HM Revenue & Customs rules allow so many exemptions – but many people fail to use them.
Associate Solicitor, Jenny Oxley said: “Bereavement is already difficult and stressful enough without the added worry caused by Inheritance Tax.
“Most people are aware that the first £325,000 of their estate is free from IHT – but few realise the other opportunities now available.
“Ongoing changes to allowances mean that married couples will now be able to shield up to £1 million from IHT” she added.
There are other ways to remove money from your estate so it will not be liable for IHT. These include gifts and trusts but it’s important to choose the correct trust to suit your circumstances – not all are exempt from tax.
Gifts will be exempt from IHT if they fall within HMRC rules. You can give:
- £3,000 of gifts in any one tax year as an annual exemption (and another £3,000 from the previous year if you have not already done so).
- £5,000 as a wedding gift to a child (£2,500 for a grandchild or great-grandchild; £1,000 to anyone else).
- £250 per person (to an unlimited number of people) as small gifts, if you haven’t already used another exemption on the people concerned.
- Gifts from surplus normal income are also exempt. These can include Christmas and birthday presents. You must keep proper records to prove these gifts do not affect your standard of living.
- Donations to charities (and political parties) are free from IHT, no matter how much you give.
Jenny Oxley said: “This is a complex area of the law so it is important to get expert legal advice from a solicitor who specialises in wills, probate, tax and trusts.”
Coles Miller has offices in Poole, Bournemouth, Christchurch, Broadstone and Wimborne.
For further information on wills, probate, tax and trusts, contact Jenny Oxley.