By Christian Abbott
Copyright birminghammail
Inheritance (IHT) tax takings reaching a staggering £3.7billion in the five months from April to September, HM Revenue and Customs (HMRC) has confirmed. The tax-free threshold has been frozen at £325,000 since 2009 and will remain at this level until 2030. The Office of Budget Responsibility (OBR) is forecasting annual receipts will rise to a an eye-watering £9.7billion in five years, largely due to plans of including pensions in people’s taxable estates from 2027. Read more: First Direct launches competitive 7% interest savings account Ian Dyall, head of estate planning at wealth management firm Evelyn Partners, has shared three ways to reduce your inheritance tax bill. Working with a solicitor to plan or update your Will is vital to ensure all your assets are correctly accounted for. Mr Dyall added: “For families with businesses or farms, recent changes to business and agricultural property relief mean traditional mirror Wills for married couples may no longer be the best strategy.” Individuals are allowed to gift up to £3,000 per tax year without triggering the seven-year rule. Married couples or civil partners can gift up to £6,000 together, or even £12,000 if they did not use their £3,000 allowance in the previous year. People can also give small gifts of up to £250 and gifts made from excess income to anyone without incurring inheritance tax. Additionally, gifts for weddings or civil partnerships can range from £1,000 to £5,000. Mr Dyall said: “Give away more wealth during your lifetime to shrink the estate so that less of it is taxable at death.” Mr Dyall warned that pensions could be “double-taxed” if the holder dies at 75 or older, with beneficiaries facing income tax on withdrawals already subject to IHT at 40%. To get around this, he suggested that retirees might consider drawing down pensions more quickly around age 75. They could also accelerate withdrawals of the 25% tax-free lump sum for spending or gifting, starting the seven-year clock for tax exemption.
