Busting the myths about inheritance tax (IHT)
Inheritance tax (IHT) is a complex subject that can be costly if not navigated properly.
Although there are rumours that the government is considering cutting or reforming IHT, it is likely to remain an issue for taxpayers for years to come. At the moment, IHT is levied at a rate of 40% on estates worth more than £325,000, but there are ways to lower your IHT tax bill.
Here are six common IHT myths, debunked by experts, to help you save money:
1. IHT raises a large amount of money for the government. In reality, IHT raises a relatively small amount of money for the Treasury in comparison to other tax levies.
2. Only the very wealthy pay IHT. In fact, IHT can apply to those who are merely well-off rather than very wealthy, especially in areas like London where property values have increased significantly.
3. A property can be gifted, meaning no tax will be payable on it. While it is possible to gift a property tax-free, there are conditions that need to be met. Professional advice is important as other taxes may apply.
4. IHT only applies to property. Almost every asset within an estate is liable for IHT.
5. Assets abroad are not counted for UK IHT. If you live in the UK and are domiciled here, your entire estate worldwide is potentially taxable on your death regardless of where it is situated.
6. Everyone will pay some form of IHT. In reality, only a small percentage of estates have to pay, although most estates will have to prove to HMRC there’s no IHT to pay before the distribution of assets can begin.
To lower your IHT liability, there are several strategies you can use. For example, making full use of any allowances, gifting wisely, considering a transfer, and diversifying your investments. However, it is important to seek professional advice as this is a complex area.
At Ancojada, we understand that IHT can be confusing and stressful. That's why we offer expert advice to help you navigate this complex subject and minimize your tax bill. Contact us today to find out how we can help you.
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Information provided and any opinions expressed are for general guidance only and not personal to your circumstances, nor are they intended to provide specific advice.
Tax laws are subject to change and taxation will vary depending on individual circumstances.
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