Tony Granger examines different ways to reduce the incidence of inheritance tax payable on an individual’s estate.
Inheritance tax (IHT) is payable at 40% on the taxable value of an individual’s estate on death, after all deductions, exemptions, etc. are taken into account.
If chargeable lifetime gifts are made (usually gifts into a discretionary trust), any amount above the unused portion of the IHT ‘nil rate band’ (currently £325,000) is taxed at 20%. In this way, IHT can be payable upfront whilst still alive.
The government currently raises £5.4 billion from IHT receipts (in 2020/21), expected to rise to £6.3 billion in 2023/24.
Personal strategies to reduce IHT
These measures can reduce an individual’s estate and save IHT;