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Five Ways to Protect Your Wealth: A Guide to Inheritance Tax

Protecting your wealth from inheritance tax

How to Protect your Wealth from Inheritance Tax

Inheritance Tax (IHT) is no longer an issue that only the wealthiest in society are facing.

Thanks to the sustained increase in house prices, high inflation, and extended tax freezes, more and more people are being hit with an IHT bill.

The data shows that HMRC brought in £7.1 billion from IHT receipts between April 2022 and February 2023.

Without astute IHT planning, you or your family could inadvertently end up having to give up a sizable portion of your estate to HMRC.

To help you navigate this potentially tricky territory, we’ve compiled a list of five steps that could help shrink your IHT bill:

Give Cash Gifts

Gifting presents one of the most straightforward avenues for decreasing the value of your estate. Interestingly, if you survive for seven years post-gifting, no IHT will be due on these. Moreover, if you survive for a minimum of three years, the IHT owed is determined on a sliding scale. Regular support payments to family members could be a viable option, as long as they don’t impact your standard of living.

Make the Most of Your Pension

Typically, your pension pot does not count towards your taxable estate for IHT. Therefore, it could be quite tax-efficient to keep your pension savings invested and then bequeath them to family members or future generations.

Take Advantage of Inheritance Tax Business Relief & AIM

Investments that qualify for Business Relief can be free from IHT after a period of two years. If you’re a business owner, or hold an interest in a business, your estate may be eligible for IHT relief. One strategy is to invest in AIM shares which qualify for Business Relief, potentially providing 100% IHT relief.

Look Into Trusts

Trusts can be an efficient way to pass on your assets in a tax-friendly manner while maintaining some control over the gifts. As the world of trusts can be intricate, it’s vital to seek professional advice to ensure you select the most suitable trust type for your needs.

Get Covered with Inheritance Tax Protection

‘Whole of life’ is an insurance plan that enables your beneficiaries to tackle an IHT liability. True to its name, this policy covers you for your lifetime and provides a lump sum to your family or beneficiaries. This lump sum can be used to offset an IHT bill, or to safeguard your family’s standard of living.

August 2023


Speak to an Inheritance Tax Expert

If you’re keen to explore your IHT needs in a no-obligation meeting, we’re only a phone call away on 0131 260 2760, or you can reach us by clicking here.

Please remember that the value of investments, and any income from them, can fluctuate. They can go down as well as up and investors may not get back the full amount they invested.

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