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Are You Going To Pay Too Much Inheritance Tax?

You were always told to get a career, buy a house and save money for retirement. You, like thousands of people over the UK, did exactly that and now stand to lose a lot of what you have worked for. I am talking about Inheritance Tax, once a tax reserved for the ultra-wealthy but now a tax that more and more people are falling victim to.

Property prices have been rising sharply for the last few decades, and this is causing many people to go above their threshold for Inheritance Tax (known as the inheritance tax nil rate band (NRB))

Inheritance Tax is charged at a rate of 40% on everything you own over your NRB, but seeing as everyone has an NRB of £325,000 (£500,000 if you are leaving property to direct descendants), it isn’t that difficult to find you are over your allowance. The total amount of inheritance tax collected in the tax year 2020-21 increased to £5.4 billion, up 4%, compared to the previous year. With house prices continuing to soar, you can trust inheritance tax will continue to rise along with it.

So what does this mean for you and your family? When you pass away, your children may inherit a large tax bill alongside the family home. This could mean that they will be forced to sell the home they have grown up in or sell the property you had wanted them to rent to help with the grandchildren. What’s worse is that years of your hard work could vanish into the tax man’s pocket.

You are probably thinking about that old adage, “There is nothing sure in life but Death and Taxes.” The good news is that you can do something about it before it becomes due, but you must act now!

You could give gifts to your children before you die, therefore reducing the value of what you own, hopefully to below your NRB. It is important to note, however, that any gifts over the value of £3,000 in any year will trigger the “seven-year gift clock”. You must survive for seven years after giving any gifts. Otherwise, the value of the gift will be added back into the value of your assets for calculating inheritance tax.

But what if you think you might need that money later? You may be quite comfortable now, but what about in five years, ten years, twenty years’ time? What if you become ill or require Long-Term Care? A gift is a no-strings-attached affair. Any gifts you give now, you also give up the right to in the future. When considering the future, your children may have used it to buy a house or put your grandchildren through university, they may not be in a position to return the money to you.

Fortunately, there is a solution: setting up a trust fund to avoid inheritance tax.

A Trust allows you to make gifts now yet retain some level of control, so you aren’t left out of pocket if your circumstances change. An increasingly popular option for the growing number of people with inheritance tax worries. When creating a trust to avoid inheritance tax, you can benefit in several ways:

  • Generate a new source of income for you.
  • Give gifts now but have the option to dip back into the money if you need it later.
  • Allow you to grow your money, with the growth being immediately free from inheritance tax.
  • Protect an inheritance for a disabled person.
  • Protect your children from the financial impact of suffering a divorce.
  • Avoid paying Capital Gains Tax if gifting a second property.
  • Protect your assets from being means-tested to pay for care.
  • Legacy Planning and creating Generational Wealth.

Inheritance Tax planning trusts can be complicated, and it is recommended that you use a professional Independent Financial Adviser to create one.

The top Estate Planning firm in the UK are the people at They were founded with the express goal of mitigating Inheritance Tax and they are the UK’s No. 1 inheritance tax specialists. They aren’t like the other big firms that treat you like a number; they really get to know you and put your needs first.

Once you know how much you stand to save, you can choose to have a convenient Zoom call with one of their Tax Advisers or book an appointment in their office where they can walk you through the options in a stress-free and easy to understand way over a cup of coffee.

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