Careful planning now can help reduce inheritance tax for your loved ones in the future.

Inheritance tax (IHT) is levied on your total wealth before it can be passed on to your beneficiaries. This includes cash, assets and property, as well as some of the gifts you make during your lifetime.

For some, the current nil-rate threshold of £325,000 per person will go up to £500,000 by year 2020/21, if a main residence allowance is available in your particular circumstances.

IHT is levied after deductions such as mortgage and reasonable funeral expenses, as well as final income tax and capital gains tax liabilities accrued prior to death have been deducted. Tax at 40% is due on anything above the nil rate band threshold.

If you are a married couple or civil partners you can pass your possessions to each other tax-free. The remaining tax-free allowance of the first spouse or partner gets passed on to the surviving spouse or partner.

At H&K, we can help you reduce inheritance tax, or possibly even eliminate a potential IHT charge with our specialist advice and careful planning. Some of the options we can guide you through to help you ensure the best outcome are:-

When making gifts, we can check if they are tax-free, potentially exempt transfers (PETs), or taxable gifts. There is a chance tax will be due if the value of your gifts amounts to over £3,000 in a year and they were made in the last seven years before the end of life.

Spend or give away part of your wealth during your lifetime, making sure you leave enough money for yourself to live comfortably.

Take out a life insurance policy under trust, as the pay-out doesn’t count towards your estate and may be big enough to cover the IHT bill.

Make the most of your will to ensure those you want to inherit do so. Consider adding a deed of variation to your will, so your beneficiaries may redirect part of the inheritance to someone else, with their mutual agreement.