HMRC<\/a> typically expects payment by the end of the sixth month after death.<\/p>\nTo calculate the amount payable, an advisor or your family will have to add up all your assets, subtract the nil-rate band and the residential nil-rate band if applicable, and pay up to 40 per cent on the remainder.<\/p>\n
The residential nil-rate band increases the threshold to a joint \u00a31m for couples who own a property and leave it to their direct descendants.<\/p>\n
But this allowance begins tapering once an estate exceeds \u00a32m and is completely removed at \u00a32.3m.<\/p>\n
The freeze on IHT thresholds and other policy changes means the number of families liable for the tax is set to double by 2031.<\/p>\n
By the start of the next decade, 9.3 per cent of all deaths will be subject to IHT. <\/p>\n
The extension of the freeze on thresholds is expected to raise a record \u00a314.5bn, pushing the number of estates liable to 63,100 in 2029\/30, up from 32,200 this year.<\/p>\n
Steps to limit inheritance tax<\/p>\n
Start early and plan ahead<\/p>\n
IHT planning is increasingly relevant as more families fall into the tax net with experts warning people to be aware their estate could be affected \u2013 even if they don\u2019t think their estate is big enough. <\/p>\n
Craig Rickman, personal finance editor at interactive investor, warned that \u201cmany families want to pass on wealth during their lifetime, but the rules around IHT can catch people out \u2013 particularly when it comes to gifts made in the final years of life.\u201d<\/p>\n
One rule to be aware of is the seven-year rule which says gifts made within seven years of death may still be taxed. If someone lives longer than this after gifting, there is no tax left to pay. <\/p>\n
Rickman also noted that the UK\u2019s move to a residence-based IHT system means long-term residents could be liable on worldwide assets, including overseas property and foreign investments.<\/p>\n
Under this system,\u00a0non-UK assets will be within the scope of IHT\u00a0if an individual qualifies as a long-term resident.<\/p>\n
Make the most of annual gift allowances<\/p>\n
Using the exemptions available each year can steadily reduce the size of your estate.<\/p>\n
Rickman pointed out that every tax year you can gift up to \u00a33,000, the annual exemption, without triggering an IHT charge.<\/p>\n
Couples can combine allowances to give \u00a36,000 tax-free each year, or even \u00a312,000 if last year\u2019s allowance was unused.<\/p>\n
Extra allowances apply for wedding gifts, with parents able to gift \u00a35,000 to a child and grandparents able to give \u00a32,500 to a grandchild. <\/p>\n
Small gifts of up to \u00a3250 per person are also exempt. Rickman explained: \u201cGifting \u00a3250 to six people annually means passing on \u00a330,000 over 20 years \u2013 completely free of IHT.\u201d<\/p>\n
Gift from surplus income<\/p>\n
Gifting from surplus income is an effective but often overlooked strategy.<\/p>\n
If you have income left over after covering your living costs, you can give that money away immediately without it being counted as part of your estate \u2013 and these gifts aren\u2019t affected by the seven-year rule.<\/p>\n
The key is meeting the qualifying conditions: the gifts must come from income, follow a regular pattern, and leave you enough income to maintain your usual standard of living.<\/p>\n
Consider charitable giving<\/p>\n
Charitable donations reduce IHT while supporting causes you care about.<\/p>\n
Gifts to UK-registered charities are completely exempt, and if at least 10 per cent of your estate is left to charity, the IHT rate on the remainder falls from 40 per cent to 36 per cent.<\/p>\n
Rickman noted that for larger estates, this reduction alone can \u201csave families tens of thousands of pounds.\u201d<\/p>\n
Plan for family structure and spousal transfers<\/p>\n
Careful planning is especially important in blended families or where children from previous relationships are involved.<\/p>\n
Rickman said: \u201cWhile transfers between spouses and civil partners are exempt from IHT, wills need to be explicit about who should ultimately inherit \u2013 especially where stepchildren are involved.\u201d<\/p>\n
He added: \u201cWithout clear instructions, assets may not be distributed as you intend, potentially causing friction among surviving loved ones, and families could miss out on valuable allowances such as the residence nil-rate band.\u201d<\/p>\n
Keep detailed records<\/p>\n
Accurate records are essential to ensure gifts are properly documented and recognised for tax purposes.<\/p>\n
Rickman advised: \u201cAbove all, keep good records of what you give, who you gave it to, and where the money came from.<\/p>\n
\u201cWithout clear documentation, your loved ones may struggle to prove to HMRC that gifts were legitimate and could face unexpected tax bills as a result.\u201d<\/p>\n
Open a Junior ISA for children<\/p>\n
If you have children in your life who are under the age of 18, you could consider paying into a junior ISA for them each year. This is counted as being given away immediately for IHT purposes but is tied up until they reach the age of 18.<\/p>\n","protected":false},"excerpt":{"rendered":"There will be some changes to the way inheritance tax works in April 2027. Experts reveal the way…\n","protected":false},"author":2,"featured_media":322892,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[3409,45,49,48,133,27382,131,132,3322],"class_list":{"0":"post-322891","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-budget","9":"tag-business","10":"tag-ca","11":"tag-canada","12":"tag-finance","13":"tag-inheritance-tax","14":"tag-personal-finance","15":"tag-personalfinance","16":"tag-tax"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/322891","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=322891"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/322891\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/322892"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=322891"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=322891"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=322891"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}