UK households can reduce inheritance tax to £0 using 'four tricks'

UK households can reduce inheritance tax to £0 using 'four tricks'
-Credit:Reach Publishing Services Limited


UK households can reduce inheritance tax bills to £0 using four legitimate techniques. Inheritance tax receipts for April to December 2024 reached £6.3bn, a £0.6bn rise compared to the same period last year, new Labour Party government and HMRC data shows.

The data from HMRC highlighted the continued upward trajectory of IHT over the past few years reaching record highs. Jonathan Halberda, specialist financial adviser at Wesleyan Financial Services, said: "Given that the inheritance tax threshold has been frozen until 2030, it’s almost inevitable that IHT receipts will continue to rise every month."

Mr Halberda said: "We can expect a jump in the number of estates that will be caught in the IHT net in April 2027, when an IHT exemption for money left in pensions on death is closed. This is something that will also pull more people who might not have thought of themselves as well-off enough to be hit by IHT into the tax net.”

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He added: "If you haven’t already, now is the time to speak to an expert financial adviser and formulate a plan to pass on your assets as tax efficiently as possible. There are a whole range of options available." Among his tips were gift-giving and trusts.

He said: "In general, every year you are allowed to give gifts of any value to a spouse or partner, or gifts of up to £3,000 to anyone else. You can also make regular payments out of your income, which can help stop the value of your estate exceeding the £325,000 tax-free allowance."

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He said "But there are limits. Gifts given less than seven years before you die can be taxed, depending on the gift’s value and your relationship to the recipient." Mr Halberda said: "This means they technically don’t belong to you anymore, so they aren’t counted as part of your estate.

"A trust is a legal arrangement where assets are held by a trustee or group of trustees for the benefit of someone else, but you can still control how, when and to whom the money is paid out." Other ways were to be married, or write a Will.

Mr Halberda said: "You can leave your entire estate – including the family home – to your spouse or civil partner with no inheritance tax to pay, even if its value exceeds the £325,000 threshold. Couples who are living together, no matter how long they have been in a relationship, don’t qualify for this exemption. As a result, some couples' inheritance planning may include getting married or forming a civil partnership.

"Without a will, you have no say over who inherits what or how much inheritance tax may have to be paid. By making a will and reviewing it regularly, you can take advantage of all the exemptions and allowances that can help you keep your inheritance tax bill as low as possible."