Harpur Wealth Can Help With Inheritance Tax Planning
Many of our clients worry that their family will end up paying a huge tax bill on the wealth they wish to pass on. The majority of them have worked hard all their lives, and paid tax on everything they’ve earned, so they are looking for ways to minimise the amount of inheritance tax payable on their estate. Harpur Wealth Management helps to reduce the tax burden by offering inheritance tax planning advice alongside estate planning guidance.
How Does Inheritance Tax Work?
If your estate (property, savings, investments, business, life insurance, vehicles) amounts to more than £325,000, your beneficiaries may be liable for payment of 40% to HMRC. If you leave your property to a direct descendent – your child or grandchild, for example – you will benefit from an additional tax allowance (the nil-rate band) of 175,000.
The inheritance tax threshold is currently frozen until 2026. Prior to this announcement in the 2021 budget, the main-residence nil-rate band was adjusted each year for inflation. A freeze needs to be managed by individuals, therefore, as the cost of property is likely to rise, but the £175,000 threshold will remain static.
3 Inheritance Tax Tips
Harpur Wealth always tailors the inheritance tax planning advice we offer to our clients, matching their specific circumstances to the opportunities available. The tips we’re offering here are, therefore, broad brushstrokes only, giving an indication of the kinds of strategies we employ.
1. Leave Your Allowance to Your Partner
If you leave your estate to your civil partner or spouse, they won’t have to pay any inheritance tax, so long as they’re a resident in the UK. Even better, if you don’t have to use your allowance (£325,000 + £175,000 = £500,000) either in full, or in part, it passes to your partner. They could, therefore, end up with a tax-free allowance of 1 million.
2. Make a Donation to Charity
Leaving money to a charity you care about in your will does good in the world, and it’s exempt from inheritance tax. If you know that you will be liable for inheritance tax, leaving 10% of the amount liable to a charity, rather than HMRC, will reduce your tax burden from 40% to 36%.
3. Give a Gift
Making a gift of your assets, so long as it occurs 7 years before your death, means that the recipient won’t pay inheritance tax on it, and your estate will be reduced. If, however, you die within 7 years of having made the gift, it may be the case that the tax is payable. Harpur Wealth can advise on the type of gift, and its value, to help with this.
When is a Good Time to Start Planning for Inheritance Tax?
Clients often ask us when is a good time to seek inheritance tax planning advice. We would recommend contacting us earlier rather than later in order to take full advantage of the options we can offer. Don’t wait until you’re retired. Come and talk to us when you have built your assets and are maybe still working. Then we can create a long-term plan that has the maximum impact on the inheritance tax your loved ones will pay.
Would you like to start a conversation with us about ways you can reduce the inheritance tax your family will pay? Book a free consultation online, or call us on 01234 924620
This article is for information only and must not be considered as financial advice. We always recommend that you seek independent financial advice before making any financial decisions.
The value of your investment can go down as well as up and you may get back less than the amount invested.
‘The Financial Conduct Authority does not regulate taxation advice’