Can I mitigate IHT?
There are various ways
to mitigate IHT, the most
effective being to reduce the
size of your estate while you
are alive.
Consider making gifts in
lifetime. Individuals can give
away up to £3000 a year
without any charge to IHT. If
you didn’t use your allowance
last year then this can be
brought forward and you can
gift £6000 free of IHT.
There is a ‘small gifts
exemption’. You can give as
many gifts of up to £250 per
person as you want during the
tax year as long as you haven’t
used another exemption on
the same person.
Any relatives getting married?
You can make gifts to them
free of IHT, though how
much you can gift depends
on your relationship to the
happy couple. You can gift
£1000 to anyone. £2500 to a
grandchild, or £5000 to your
own child.
You can take advantage of
the ‘normal expenditure out
of income’ rule and make gifts
out of your regular income.
This will be IHT free so long as
your regular standard of living
is not effected. This could be
in the form of maintenance
for your spouse or children, or
even regular gifts for special
occasions.
advice on transferring assets
to trust since trusts are also
taxed in their own right.
The Residential Nil Rate Band
You could consider gifting
property or larger sums
of money away in lifetime.
Provided you survive by 7
years these will be free of IHT.
Gifts like these are known as
PETs. This April (2017) a new IHT
threshold was introduced.
The ‘Residential Nil Rate
Band’ is available to anyone
who owns a property that
they have used as a residence
at some point so long as they
leave the property to their
‘direct descendants’ (children,
grandchildren, step-children
etc.). It’s currently worth
£100,000 but is increasing
by £25,000 per year until it
reaches £175,000 in 2020/21.
So currently you could have
an IHT threshold of up to
£425,000, or £850,000 for
spouses.
Consider transferring some
assets to a trust. You can’t
retain any benefit from the
asset in the trust though, or
this will still form part of your
estate for IHT when you die.
We’d recommend specialist This new threshold may not
be available if your estate is
in excess of £2million (the
taper threshold). For each £2
your estate is over the taper
threshold the RNRB will be
tapered away by £1.
The Society of Will Writers
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