Expert Debunks Common Misconception About Inheritance Tax

In the realm of finance, there exists a prevalent misconception about inheritance tax. Many individuals hold the belief that it solely affects the affluent, yet this notion is no longer accurate. Given the escalation in property values and the stalling of inheritance tax thresholds, an increasing number of families encounter substantial tax obligations.

Recent data demonstrates that one in every 25 estates presently pays inheritance tax, with an average levy of £239,000 in the ongoing tax year. This represents a substantial 11.5 percent surge from just three years ago. Furthermore, it is projected that over 30,000 families will be required to relinquish a portion of their inheritance to the tax authority.

Nevertheless, there exist legal methods to alleviate this tax encumbrance. Jonathan Halberda, a Specialist Financial Adviser at Wesleyan Financial Services, debunked particular myths concerning inheritance tax. He emphasised that individuals can transfer their family property to their partner or children without incurring inheritance tax. Seeking professional counsel and taking early action, such as creating trusts, bestowing gifts, and acquiring relevant life insurance policies, can also aid in minimising the risk.

The standard inheritance tax rate stands at 40 percent and is solely imposed on the segment of the estate surpassing the threshold of £325,000. Halberda proffered various suggestions for individuals seeking to diminish their tax responsibility. These encompass leveraging the IHT spouse exemption, drafting a valid will, utilising trusts, engaging in gift-giving within the permissible limits, and bequeathing gifts to registered UK charities, all of which can contribute to curtailing or nullifying inheritance tax.

In summary, it is imperative for individuals to comprehend the intricacies of inheritance tax and take proactive measures to safeguard their estates. By remaining well-informed and seeking professional guidance, it is feasible to navigate the ramifications of inheritance tax and secure a more favourable outcome for subsequent generations.