Secure more for your loved ones by planning wisely today.
Inheritance Tax can significantly affect what your family receives from your estate. But with the right guidance, you can take steps to reduce or even eliminate this burden.
Erin Clarke, Solicitor in our Wills, Probate & Planning for the future team at Bromleys, discusses what you need to consider when making provisions for your loved ones.
Understanding Inheritance Tax: What You Need to Know
Inheritance Tax is charged on the value of your estate, your property, savings, and possessions when you pass away. If your estate exceeds the standard threshold of £325,000 (or up to £1 million for married couples using the residence nil-rate band), your beneficiaries could face a 40% tax bill.
With careful planning, you can make sure more of your estate goes to the people you care about.
Gifting and Trusts: Effective Tools for Reducing Tax
One of the simplest ways to reduce your estate’s taxable value is through gifting. You can give away up to £3,000 each tax year without incurring tax. Gifts made from surplus income or those that meet the seven-year rule may also be exempt.
Trusts are another valuable option. Whether it’s a discretionary trust or an interest in possession trust, placing assets in trust can help manage how your wealth is distributed, and potentially reduce your Inheritance Tax liability.
Pensions and Property: Planning with Purpose
Pensions can be passed on tax-free if you die before age 75. After that, beneficiaries may pay income tax, which is often lower than Inheritance Tax. This makes pensions a strategic part of estate planning.
However, following the budget in 2024, most pensions will form part of your taxable estate as of April 2027. This should be considered when making nominations on your pension, and monies received out of an unused pension pot would affect your inheritance tax position.
Property also plays a key role. Leaving your home to children or grandchildren may qualify for additional allowances. If you own agricultural land, it may be eligible for relief if used for farming or environmental purposes.
Spouse Exemptions and the Importance of a Will
Transfers between spouses or civil partners are generally exempt from Inheritance Tax. However, without a valid will, your estate may not be distributed according to your wishes. Under the rules of Intestacy, depending on the value of your estate, your estate may not pass entirely to your spouse, leaving the estate liable to inheritance tax.
A professionally drafted will ensures your intentions are honoured and helps maximise the allowances available to your estate.
Why It’s Time to Take Action
With potential changes to tax policy under the current government and increasing scrutiny from HMRC, now is the time to review your estate planning. Using HMRC’s Inheritance Tax calculators and seeking legal advice can help you stay ahead of any changes.
You can access the government’s Inheritance Tax tools here.
Bromleys Can Help You Protect What Matters Most
Inheritance Tax planning isn’t just about reducing tax, it’s about protecting your legacy. At Bromleys, we take the time to understand your personal circumstances and provide tailored, practical advice to help you plan with confidence.
Whether you need help drafting a will, setting up a trust, or reviewing your estate, our team is here to support you every step of the way. Call us today on 0161 884 0904 or email bromleys@bromleys.co.uk to see how we can help you with Inheritance Tax planning.