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Inheritance Tax reaches new highs

HMRC collected £5.3 billion from Inheritance Tax last year, a 13% increase on the Inheritance Tax paid in the 2016/2017 tax year – that’s a significant increase.

There are many reasons why experts think there was such an increase, including the fact that there was quite a property growth spurt over the past few years, as well as the Nil Rate Band being frozen at £325,000.  This increase includes the introduction of the Residential Nil Rate Band! Imagine if we had not had that? With that allowance increasing by only £25,000 in April this year, it is unlikely to make a huge difference to these figures.

However, all is not lost, here are 5 ways to potentially help you pay less Inheritance Tax that could help keep your cash in the family. Remember, Inheritance Tax is 40% – nearly half of the asset’s worth!

  1. Make a Will …
    • Often neglected but very important. Without a Will your assets will pass according to the Rules of Intestacy, meaning you will have no control over who they go to, and a larger proportion may end up in the taxman’s pocket.
    • If you would like to find out what the Rules of Intestacy are, follow this link:
  2. Give it away …
    • There are many ways to gift money during your lifetime that mean the assets are outside of your estate on death.
    • You can use annual exemptions, which means there is no waiting period for the asset to leave your estate, it is gone immediately.
    • To find out what the gifting allowances are, follow this link:
  3. Give even more away …
    • If you wish, you could give away more than your annual exemptions allow. Providing you then live for a further seven years or more, the full amount of the gift will be outside of your estate for Inheritance Tax.
    • Make sure you keep a detailed record of your gifts so that HMRC cannot question this after your death.
    • Follow this link again for more details:
  4. Use your pension allowances …
    • Pensions are free of Inheritance Tax so make sure you use your annual pension allowance of £40,000 if you can.
    • Remember you must have net earnings of at least £40,000, otherwise you can only put in the maximum amount of your net earnings … but that is better than putting in nothing.
  5. Set up Trusts …
    • Trusts can be very effective in reducing the size of your estate. They work similarly to gifts in that you must live for seven years after you put money into a trust, but they provide much more protection and control over the assets during your lifetime.
    • If you want to make a gift but are worried about how the recipient may use the money, or you don’t want them to have access to it just yet, then Trusts are definitely worth considering.
    • Obviously there are many more rules and many different types of trust, so come and see us and we can set up the right one for you.

Redwood Financial can help you manage & grow your wealth and protect your estate. Come along to one of our Free Client Seminars to learn more: Book online at  or call us on 01489 877547.