The amount that each individual can leave free of tax is £325,000 (the Nil Rate Band) and this has not changed since 2009 and is frozen until 2028. A total of 19 years!

Since 2009, the average person's estate has increased significantly as a result of inflation but the Nil Rate Band has remained the same. This means that a growing number of estates are going to be caught by inheritance tax.

But there are steps that you can take to ensure that your estate benefits from the maximum amount of allowances on your death.

1. Taking advice and putting in place an effective will

A well-structured will can ensure that your wealth passes on to those that you wish to benefit whilst also being tax efficient.

2017 saw the introduction of the Residence Nil Rate Band. This gives each individual an additional £175,000 they can leave free of tax on their death, if they leave property to direct descendants and their estate is not valued at more than £2million (for every £2 the estate is over £2million the allowance in tapered by £1). There are very specific requirements to enable an estate to benefit from this additional amount and careful planning and will drafting is required, particularly for those with children from previous relationships.

2.  Utilise exemptions   

In your lifetime there are also a number of exemptions that you can utilise to pass wealth on, without incurring an inheritance tax charge. Some of these exemptions include:

  • Utilising the annual exempt amount of £3,000 each tax year;

  • Making gifts on weddings or civil partnerships; and

  • Making regular gifts out of excess income.

Using these exemptions allows an individual to reduce the value of their estate for inheritance tax purposes prior to their death, whilst also passing on wealth free of tax. 

3. Leave a legacy to charity

Any gifts to charity in a will pass free of inheritance tax and if the gift is 10% or more of the value of an estate, the overall rate of inheritance tax is reduced from 40% to 36%. This can even result in other beneficiaries receiving more from your estate as a result of less inheritance tax being paid whilst still benefiting charity.

Talking about planning for death can be uncomfortable but it is so important. If you have any questions regarding the content of this insight, please reach out to one of the team.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at July 2024. Specific advice should be sought for specific cases. For more information see our terms & conditions.

Date published

05 July 2024


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