Avoiding Inheritance Tax By Making a Will

In the UK, the inheritance tax threshold – also known as the nil rate band – is £325,000. That means that if your estate is worth more than this amount, inheritance tax could be applied to the part of your estate that exceeds the threshold.

How to avoid inheritance tax

Unsurprisingly, inheritance tax is widely disliked. It’s applied to almost everything you’ve worked hard for – such as savings, property and personal possessions. But there are ways to minimise the amount of inheritance tax you pay.

One of the most important things you can do is write a Will. This will give you more control over the way your estate is distributed when you die, which could affect how much inheritance tax you owe.

In this guide, we’ve explored three of the main ways you can use your Will to reduce inheritance tax. These include:

  1. Leaving your estate to your spouse
  2. Making the most out of your property allowance
  3. Leaving gifts to charity

Keep reading to find out more. Or for Wills and estate planning advice that’s tailored to you, get in touch with our knowledgeable advisors.

1. Leave your estate to your spouse

When you leave your entire estate to a spouse or civil partner, there won’t be any inheritance tax applied. This means that you can freely pass on property or other assets, regardless of how much they’re worth.

After receiving the entirety of your estate, your other half will take on your unused inheritance tax allowance. This will increase their threshold, so they will be able to pass on up to £650,000 to your children or other beneficiaries, tax-free.

2. Make the most of your property allowance

As we’ve mentioned, there will be no inheritance tax applied when you leave assets such as property to your spouse or civil partner. But what if you want to leave your home to your children or grandchildren?

In the UK, your tax-free threshold can increase to £500,000 if you’re planning to pass property on to your children (including adopted, fostered or stepchildren) or grandchildren. But your total estate will need to be worth less than £2 million.

If you’re married, it’s also possible to combine your allowances. This means that you could pass on an estate up to the value of £1 million, without any tax being applied.

3. Leave gifts to charity or a non-profit organisation

When you leave money to a UK-registered charity, it will be completely free from inheritance tax. The same will apply when leaving a gift to a political party or a local sports club.

If you leave more than 10% of your taxable estate to a charity or non-profit organisation, the rate of inheritance tax applied to the rest of your estate will also be reduced from the standard 40% to 36%. This might not seem like much, but it could make a significant difference to your final tax bill.

How a solicitor can help to reduce inheritance tax

Writing a Will can feel like a daunting task, especially if you’re concerned about the implications of inheritance tax. But using the services of an experienced solicitor can help to remove some of these worries.

We work with reputable solicitors who are experienced in inheritance tax planning. They’ll help you draft your Will in a way that works best for you and your loved ones. So you’ll have the reassurance of knowing those closest to you will benefit fully from your estate.

To find out more about how we could help you, give us a call on the number at the top of the screen. Or if you’d prefer, you can start your enquiry online.

Note: First4Lawyers and their partners are not tax advisors and we recommend you seek appropriate independent financial advice before making any decisions that relate to tax and property.


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