Inheritance tax

enthusiasticsaver

You can look into charitable donations and there are other ways of reducing inheritance tax. Speak to a financial advisor. However if you do not have direct descendants like children or grandchildren unless you have an antipathy of giving money to HMRC out of your estate just look at it that they will still get the money but everything over £325k is subject to the 40% IHT.

Albermarle

All charitable donations, either when living or in a will are exempt from any IHT.

A 10% donation to charity in your will of your net estate ( the part actually subject to IHT, not the whole estate) reduces any other IHT liability to 36%.

spenderdave

Yes the amount of inheritance is largely irrelevant if you die with a large estate. I am in the same situation as the OP, single with no children, with a house (bought for peanuts many years ago) which is already over the IHT threshold then savings, shares etc which puts me well into IHT. What worries more is the hassle my executors (niece and nephew) will have to sort it all out, I have done all I can to organise things but at the end of the day it is still a lot of work and potentially large loans to organise before it gets sorted. Will already donates 10% to charities but giving gifts while I am still living and keeping proper records is decidedly hard work - and you have to do an awful lot of those to make a sizeable inroad into that IHT payment.

A £1 million threshold I would be just about be exempt.

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/82152833#Comment_82152833

Early planning and making sure your executors and heirs understand you wishes is important - as is making sure someone has access to all your account passwords when needed. I agree with the principle of IHT, but I still want to maximize the amounts my heirs will receive.

I live in the USA and my beneficiaries are my nieces back in the UK. Right now I have minimal IHT worries as the Federal allowance is $15M, but my estate will have to pay IHT to the state I live in on amounts over $2M at a progressive rate that tops out at 16%. If I move back to the UK that situation will radically change. But wherever I live there will be cross border taxes and inheritances to negotiate. I have done what I can by leaving parts of my estate to a revocable trust so my executor and trustee has immediate access to funds to pay bills before dispersing the residue of the estate and my retirement accounts go directly to my nieces and I am doing things now to reduce their liability to US and UK income taxes on those.

safe_hands2

https://forums.moneysavingexpert.com/discussion/comment/82152799#Comment_82152799

I don't get it either. We all want good health care, social care, schools etc. If you give lots of money to charity as a legacy, how do you know they are spending it in the way you would want?

I admit I'm biased on this topic as I haven't inherited any money and never will. But the idea of inheriting even £20000 would seem like a luxury, let alone some of the sums involved.

It would be great for IHT to contribute to a more equal society.

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/82153756#Comment_82153756

IHT should be part of an integrated taxation regime that funds Government obligations. The trick is what to tax and how much to tax it. IMO UK IHT hasn't kept up with the changing size of estates due to the increases in house prices and the inclusion of pensions in the estate for IHT purposes. I'd like to see larger taxes on dividends and capital gains and also the ISA allowances seem very high to me, but I'd also like to see an increase in the tax free IHT allowance.

When it comes to charitable giving you can never be 100% sure how your money is spent, but you can do research and choose what seem to be well run charities with specific objectives. I give to local cultural organizations, a local homeless shelter, public broadcasting, ACLU, Liberty, Doctors Without Borders and a couple of Native American Colleges and I've left them money in my will. I also want to maximize the amount of money I can pass on to my family so that they can have a solid financial foundation. So I gift to them and I'm taking actions to lower the tax bill they will have to deal with when I die. I'm not thinking of myself, rather I'm thinking of my heirs while complying with the inveitibility of IHT.

poolboy

The whole of life insurance written in trust was covered in the meaningful money podcast last week. Be careful if estimating your future iht liability though, asset prices aren't decreasing in the long term.

artyboy

https://forums.moneysavingexpert.com/discussion/comment/82151972#Comment_82151972

admirable approach. IHT is always going to be a polarising tax in terms of opinions.

My own take is that if you have a fairly big estate, you've probably paid a pretty substantial amount of tax to get there while alive. Feels a bit of a double whammy to hammer you again when you're down. So to speak…

spenderdave

Mixed opinions indeed, surprised there are some on here who think IHT is a good thing…

It is not my fault that my house has increased from £12.5k in 1977 and c £400k now, I had nothing to do with it. And having never moved I have never used it to my advantage. So why should my relations have to pay a tax on this excess value? Similar my investments have been hard earned, well taxed, and I got there with good financial planning. Such things should be praised rather than penalised.

They keep saying the mantra that very few estates pay IHT, but it seems sufficient do that the income to the government mustn't be removed or the country will go bankrupt (sorry it already is!).

safe_hands2

https://forums.moneysavingexpert.com/discussion/comment/82154667#Comment_82154667

I agree, hard work and good financial planning should be praised. I would consider myself like that too, while coming from a very poor background. But I can also see that I have benefitted from the state to help me, such as from education and healthcare. A well functioning state benefits everyone.

I have friends who have zero savings because they are relying on huge inheritances in the next few years. At that point, their wealth will leapfrog mine with zero effort. That shouldn't be praised. (They've also had the benefit of parents to lean back on financially their whole lives.)