Inheritance tax – top tips to beat the taxman

Inheritance tax – top tips to beat the taxman

Friday, 27 September 2019

In my series of inheritance tax (IHT) blogs I’ve raised awareness of things you should consider. Effective tax planning can reduce an IHT bill by thousands of pounds. Now I’ll share our top tips to help you beat the inheritance tax levy.

  • Use a pension to pass wealth to the next generations. In the event of your death, the new rules allow you to pass your pension to a person of your choice without it forming part of your estate for inheritance tax. In most cases, if you die before age 75, any income is tax free in the hands of the beneficiary. If you die after the age of 75, the beneficiary will pay income tax on any pension income, but they could leave the fund untouched and pass it on themselves. These rules do not apply to all pensions, just those set up on a defined contribution or money purchased basis, so advice is vital.
  • Make sure life insurance policies are written into trust. This will mean any
    pay-out on death won’t form part of the estate for inheritance tax purposes. Your insurers can usually arrange this free of charge.
  • Rule out gifting your home to your children on the understanding you can continue to live there rent free. This doesn’t work for inheritance tax purposes. As you’ve reserved a benefit, the asset will remain in your estate, falling outside the Potentially Exempt Transfer (PET) rules previously mentioned in earlier IHT blogs. Over the years there have been many schemes and supposed opportunities publicised. Buyer beware!
  • Consider trusts, such as discounted gift trusts. A variety of trusts are available for inheritance tax planning. We have a dedicated team of trust specialists who’d be happy to assist.
  • Insurance held in trust can be bought to pay an inheritance tax bill. But it can be expensive and rates depend on age and health factors. However, if inexpensive and affordable, the insurance can effectively futureproof part or all of any inheritance tax liability.
  • Investments such as Enterprise Investment Schemes and AIM shares can be exempt from inheritance tax if they qualify for what’s known as Business Property Relief (BPR) at the time of death. Various IHT-friendly portfolios are available. However, you’d need to seek advice on such investments from an Independent Financial Adviser.

Inheritance tax is a complex tax and expert advice is always recommended. Effective tax planning can reduce an IHT bill by thousands of pounds. However, with inheritance tax there’s no ‘one size fits all’ approach to planning. A tailored bespoke approach provides the right outcomes for you and your family and we’d be delighted to help you develop your inheritance tax solution.

Need help?

For more information on how we can help with inheritance tax, please speak to me or to your usual MHA Larking Gowen contact.

Call 0330 024 0888 or email

Sally Farrow

Personal Tax Senior Manager


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