Have you ever wondered about some of the best ways to save money on inheritance tax, especially to make sure that your estate is passed on by paying as low a rate of tax as possible? If you want to find extra ways to save your family and friends money after you pass away, you must first know the basics of your inheritance tax allowances.
Using your allowances
One of the most important tips that you should remember is that everybody is allowed a nil-rate allowance, which is set over £325,000. Furthermore, you should also be aware that if you have any deductions from an exemption or another type of allowance, then you are subject to a rate of 40% for anything over this nil-rate band. However, it is also important to remember that you cannot give gifts of your estate to lower its total value so that you can avoid paying a greater amount of inheritance tax when you calculate the total value of your estate. Finally, you must also consider any financial gifts that you have given to family or friends in the last seven years of your life which may be taxed at this higher rate.
Knowing your allowances
There are several allowances which should be used when you are looking to lower the amount of tax liability associated with an inheritance. Currently, everyone in the UK has an annual rate of allowances that you can give away every year, which is set at £3000. This allowance can also be carried forward to the next financial year if it has not been used in the current or previous year, while you should also remember that this particular allowance can only be deducted from the person making the gift. In addition, this allowance of £3000 does not apply per person who is receiving the gift but to the person making the gift. However, it is possible for an individual to make a number of gifts to the value of £250 to several people without any restrictions. This particular allowance relates to giving seasonal gifts for birthday or Christmas presents, but it can also be used to lower the total value of the estate. Furthermore, a marriage allowance also exists to enable parents to give the gift of up to £5000 to their children, £2500 for any grandchildren and £1000 to any other person of their choosing.
Another way to lower the amount of inheritance tax which should be paid is to contact a firm of inheritance tax solicitors who would tell you about how you can make gifts that are in excess of the annual allowance of £3000. Indeed, there are no restrictions which exist on the amount that people can give away, especially if they are comfortable giving these gifts.
Making large gifts
If you decide you want to gift your family a significant amount of money and you survive the giving of such a gift by seven years then the total value will not be considered when calculating inheritance tax. However, you must also be careful that when making such a gift that you do not receive any benefit. Finally if you do not survive for seven years after making the gift then thelegal rate of inheritance tax will still be applied.
If you need advice on inheritance tax then contact your local solicitors immediately.