Cutting your IHT bill

● Inheritance tax (IHT) is payable at 40 per cent on anything you leave at death above the threshold of £325,000. You can leave your estate to a spouse or civil partner with no IHT payable and can transfer your allowance of £325,000 with it — so a married couple can leave £650,000 before the tax kicks in.● You can reduce your estate’s IHT liability by giving away money during your lifetime. The tax is not payable on gifts to a spouse or civil partner. If you give your money to other family members such as grandchildren, the value of the gift won’t be counted as part of your estate for IHT purposes, provided you live for seven years after making the gift.

● If you die within three years of making a gift, IHT is payable in full. If you live for between three and seven years, it’s payable at reduced rates.

● You can also give £3,000 of gifts each tax year, with IHT waived immediately. This can be carried over for one tax year, so the maximum you can give under the “annual exemption” rule is £6,000. There’s no IHT on wedding or civil partnership gifts worth up to £5,000 for a child, or £2,500 for a grandchild or great-grandchild.

● No IHT is due on individual gifts of up to £250. You can give as many people as you like up to £250 in one tax year, but the exemption is not valid if you’ve already given them gifts under a different exemption such as the £3,000 rule.

● You can make unlimited regular gifts from income, provided you’re able to maintain your normal lifestyle. This could include regular payments into a grandchild’s Jisa, for example.

● From 2017, a £175,000 allowance will be phased in that means you can leave your home to children and grandchildren tax-free when you die. This is per person and can be transferred to your partner when you die, so couples will be able to pass on homes worth up to £1 million with no IHT charge.

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