Inheritance Tax Planning

Inheritance Tax: Why Investing is the Right Option

KLOFinancial |

Currently, inheritance tax is set at 40 per cent and is applied to estates above £325,000. The term ‘estate’ includes a person’s home, savings, and possessions. For married couples, or couples in a civil partnership the nil rate band (also known as the tax-free amount) can be doubled to up to £650,000.

As discussed in our previous article, you can minimise your inheritance tax burden by giving away money/assets before you die. There is no inheritance tax charged on such gifts, as long as you live for seven years after making it. If a gift is made fewer than three years before your death, then it is taxed at the full 40%. To avoid this there is an ‘annual exemption’ where individuals can give away £3,000 worth of gifts each tax year. There are also special allowances, such as for wedding gifts.

Can you control the money you give away?

Ultimately the recipient is in charge of the money. It is, however, possible to set up trusts with the assistance of a professional, and if you are worried about how the recipient might use the money, it is worth having a conversation about it, and perhaps starting by giving them a smaller gift. You can also encourage them to invest the money you give to them.

Why you should encourage investing?

Investing has, historically, seen the best returns and offers the best chance of beating inflation. This means that the money you pass on to your children is able to work more for them.

For under 18s, parents can invest up to £4,260 every tax year into a junior Isa for each of their children. When they turn 18, the control of the account is transferred to the child. Over 18s have to open up accounts themselves and are in full control.

If you are looking for financial advice on inheritance tax or anything else, then talk to our local financial adviser team today. Please call on 01926 492406 or email us at to make an appointment.