inheritance tax checklist

While we all want to leave something to our loved ones, we don’t like the thought of them being hit with legal or financial red tape when settling our estate.

That’s why we’ve put together an inheritance tax (IHT) checklist for women – our 10 steps to protect your family from a potential inheritance tax bill this year. Let’s make 2016/17 your best saving year ever.


1. Know your liability

Estate planning is very important when lowering the inheritance tax contribution your loves ones would be expected to pay.

Regularly review the total value of your assets, so you understand exactly how much tax is liable, and you can then take steps accordingly to reduce it.


2. Make sure your will is up to date

Before you even think about how to bring down IHT, make sure you have updated your will to reflect exactly who you want your estate to be left to. This will also help you decide who to gift money to in your lifetime, which we’ll talk about momentarily.


3. Consider gifting now

Everyone has a personal allowance, which allows them to give away up to £3,000 per financial year tax-free – and if you haven’t reached this threshold, it can be carried over into the next tax year.

Additionally, you can give away up to £250 to anyone tax-free during the financial year, provided they are not the recipient of the £3,000 gift.


4. Work with your spouse

In 2007, the UK government changed regulations so that civil partners and married couples can make use of each other’s tax-free gifting allowance without having to apply for special tax planning.

Therefore, if your other half has not used up their personal allowance for the tax year, you can use it to gift more to your estate beneficiaries.


5. Discuss charitable giving

Leaving money to charity is one way of reducing your IHT bill, at the same time as helping out a worthwhile cause.

Any money you leave to charity is not liable for inheritance tax, and also helps lower the amount of your estate where tax will be payable.


6. Set up a trust

When estate planning, if you put certain assets into a trust, they no longer form part of your estate – and can therefore lower your inheritance tax bill.

The trust will need to have a minimum of two trustees, who ensure that the money is paid out to trust recipients (often grandchildren or children) in the event of your death. Many people opt for a discretionary trust, as this still allows easy access to their finances within their lifetime.


7. Take out insurance

If you think you’re going to leave your family a considerable IHT bill, think about taking out an insurance policy to cover it. This will offer them a pay out when you have passed, to help cover the costs.


8. Help with your kids’ future

In addition to the annual tax-free personal allowance, those of you with children can give away assets to your offspring.

For example, the tax on giving your children money with which to buy their own home will be written off even if it exceeds the £3,000 threshold, provided you continue to live for seven years after making the gift.


9. Spend your savings before your pension

If you are retired or approaching retirement, think about spending your savings before you dip into your pension pot.

This is because standard savings account are liable to IHT, but unused sums remaining in a pension can be passed on mostly tax-free, although they are sometimes liable to income tax.


10. Be smart – but don’t get silly

While it’s important to reduce your inheritance tax bill where possible, don’t be tempted to compromise your quality of life now just to help your family out further down the line.

Never put yourself in the position where you are struggling for money now, just to bring down IHT liability.

When you need to decide about your estate, we can help you to explore your options


The Financial Conduct Authority does not regulate wills, taxation and trust advice.

Information is based on our current understanding of taxation legislation and regulations. Any levels and bases of, and reliefs from, taxation are subject to change.


Leave a Comment

Your email address will not be published. Required fields are marked *