‘Not being able to do the maths’ The most common Inheritance Tax blunders made by Britons.
Gifts and trust funds are common ways for Britons to save money on their Inheritance Tax (IHT). However, many people continue to make mistakes while using these well-known tax-saving strategies, causing them and/or their loved ones to pay more.
Inheritance Tax is a type of tax placed on a deceased person’s estate, which includes their money, goods, and property. If the value of your estate is less than £325,000, or if you leave everything above the £325,000 level to your spouse, civil partner, or charity, no IHT is due.
The latter method is known as a gift, and it is a typical way for people to lower their Inheritance Tax burden.
Many families that have never had to worry about IHT should consider preparation, according to Jim Sawyer, a Client Partner at financial company Kingsley Napley, if they wish to avoid paying a high price.
“As you know, the majority of IHT revenue comes from reasonably well-off persons whose primary asset is their home,” he explained.
“As a result, even though the residence is usually quickly sold by the receivers, there is often a great desire to pass it on tax-free.”
The tax expert highlighted the five most common mistakes Britons make when it comes to Inheritance Tax and how to prevent them in the future in an exclusive interview with This website.
Gifts between spouses or civil partners are exempt from inheritance tax. Money, household products, stocks and shares, and real estate can all be given as gifts.
Mr Sawer, on the other hand, warns Britons against using gifts to decrease the amount of IHT paid on a family home because it does not always result in large savings.
He explained, “Making gifts to mitigate IHT where the asset values mean there is no likely IHT liability on death.”
“Worse, the individual may be consigned to financial insecurity in old age as a result of doing so.”
Furthermore, the financial expert warns the public about the dangers of so-called “gift without reservation” restrictions, which could affect how much people save in IHT.
“Giving away the family house and continuing to live there – this is ineffectual under the ‘gift with a reservation’ rules,” he continued.
“Private dwelling benefit for Capital Gains Tax (CGT) has been lost, and there has been no CGT base value increase to date.”Brinkwire Summary News”.