How can I make sure that any gifts I make from my estate are tax efficient?

When you make a Will you want to make sure that it’s as tax efficient as possible.  There are steps you can take to make sure that any Inheritance Tax (IHT) liability is reduced as much as possible for your family and loved ones.

So what can you do?

Make a Will

The first thing is to actually make a Will. Only about 30% of the UK population has a Will. If you don’t have a Will, there is no way you can minimise your family’s exposure. So if you don’t already have one, make one as soon as you can.

Inheritance Tax?

Your next step is to consider what your inheritance tax liability will actually be. If you are married, your estate can pass to your husband, wife or civil partner with no inheritance tax payable. Monies to anyone other than your spouse or civil partner that are over £325,000 (this is known as your Nil Rate Band) you’ll pay 40% Inheritance Tax.  There is also an exemption that will allow you to use any unused Nil Rate when it passed to your spouse or civil partner.  The survivor could potentially have a Nil Rate Band that would be free of tax of £650,000.

Gifts

Using gifts to give some of your estate away whilst you are still alive is a great way to minimise any tax liabilities but there are rules to be aware of. You can give away up to £3,000 a year and this is not subject to any Inheritance Tax if you die.

There are also small gift exemptions which means you can give away up to £250 to as many people as you choose on customary occasions such as birthdays and Christmas.

You can gift more than £3,000, but you’ll need to live longer than 7 years after the gift for it not to be included in your estate for inheritance tax purposes.

Charity Donations

Making a donation to charity in your Will is a great way of showing how close a charity was to your heart and it can also reduce your Inheritance Tax bill. By donating at least 10% of your estate can result in the Inheritance Tax rate being reduced from 40% to 36%. Not only does this help your loved ones, but it also helps the charity as around 13% of all charity income is received from legacies left in a Will.

You can see that there are many options to consider when reducing the impact of Inheritance Tax in your Will, but make sure you get professional advice and a professionally written Will to ensure that all your wishes are taken into account.

For further advice and help regarding  the above, please contact our Private Client Department on 01264 353411, email: wills@bsandi.co.uk or use our free, no obligation, online enquiry form and a member of our team will be happy to assist you.