It is important to understand the basics of inheritance tax planning and the IHT thresholds. This knowledge can make a big difference in your financial future, especially after the death or divorce of a loved one. You can get the most reliable services regarding inheritance tax in the UK at https://inheritance-tax.co.uk/area/inheritance-tax/.
What is Inheritance tax?
IHT is the estate tax that must be paid when someone dies. It includes all assets of the deceased, including property, possessions, and money. Gifts given by the deceased in the seven years preceding death are also subject to tax. The executor or representative of the deceased usually pays IHT.
Thresholds for Inheritance Tax
Only estates valued above the IHT threshold can be subject to inheritance tax. In 2011-12, the IHT threshold for a single person is 325,000. Married couples and civil partners may increase this threshold to 650,000 upon the death of their second partner.
IHT Exemptions
Sometimes it is possible to lower the IHT payable or to avoid it entirely if your assets exceed the threshold. There are exemptions and reliefs available that may include:
- Gift exemptions for small gifts and annually can give away up to 3,000 gifts each year tax-free, and you can also give away small gifts up to 250.
- Gifts for civil partnerships and weddings gifts that are tax-free for civil partnerships and weddings range from 1,000 to 5,000.
- Transfers that are exempt from the tax could be exempt gifts that were made within seven years of the death of the deceased are exempt from IHT regardless of their value.
Avoiding IHT – Inheritance tax Planning
It is crucial to plan for inheritance tax in order to preserve your family's assets, reduce taxes, and protect your assets. You can reduce your IHT by taking advantage of certain exemptions, but there are other financial options. For example, you can give your assets to trust funds and a discounted gift trust to ensure that you have a steady income for the rest of your life.