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Inheritance Tax

Inheritance Tax

Inheritance Tax (IHT) is a tax paid by a person who inherits money, property or possessions of a person who has died.

It is a significant consideration in estate planning, representing a potential financial obligation for your beneficiaries upon inheriting your estate. We’ll create a holistic plan that respects your desires for your estate, whether that’s providing for family, supporting charitable causes, or ensuring a smooth transition of business assets.

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Tax-Free Threshold

You won’t have to pay Inheritance Tax if the value of your estate is below the £350,000 tax-free threshold. Inheritance Tax is also not applicable if you leave everything above the £325,000 threshold to your spouse, civil partner, a charity or a community amateur sports club.

Who Needs to Pay Inheritance Tax?

IHT is typically paid by the estate of the deceased, although in some cases it can be paid from trusts or by individuals who receive gifts from the deceased within seven years prior to death.

Reducing the Rate

There are several strategies to reduce the rate of IHT your estate has to pay, including gifting money or assets during your lifetime, setting up trusts, and making bequests to charity.

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Exemptions

Gifts to your spouse or civil partner are usually exempt from IHT, regardless of the amount, as long as they have a permanent home in the UK.

Life Insurance

Life insurance payouts can form part of your estate and be subject to IHT. However, writing the policy in trust can exclude it from your estate.

Assets Held in Trust

The treatment of trust assets for IHT purposes can be complex and depends on the type of trust and its terms. Haven can provide detailed guidance specific to your trust arrangements.

Main Residence Nil-Rate Band

This is an additional threshold that applies if you pass your home to your children or grandchildren. Its value is added to the standard nil-rate band, potentially increasing the amount you can pass on tax-free.

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