Outsmart the Tax Man

The theory is that this tax attempts to redistribute wealth – that it stops the the rich from getting richer. Some believe that money going to the state in this way benefits everyone. But many believe the Government is inefficient and wasteful. The Taxpayers Alliance estimates that the Government wasted over £120 billion last year – enough to wipe out the budget deficit. So people who are concerned by this often want to make their own decisions about who benefits from their money when they die rather than letting the State decide.

 

THE MECHANICS

The current IHT allowance is £325,000. If you are worth less than this when you die, there should be no tax to pay. Anything above this limit is taxed at 40%. This means if you are worth, say, £600,000 when you die, your heirs will get a tax bill of £110,000. From 2021, an

additional £175,000 allowance may be available for those passing on family homes to direct descendants. If you trust Government promises.

 

TAX FIRST, ASK QUESTIONS LATER

Generally, IHT has to be paid within 6 months of death – before heirs can inherit.

 

CONTROVERSIAL

People have widely differing views on Inheritance Tax. Some agree that it is fair to redistribute wealth on death. Others think that what they have accumulated through their own hard work should go to their family and not the tax man. Particularly when they think

the Government wastes taxpayers’ money on ill-fated schemes and endless quangos and jobs for the boys. Whatever your views, IHT could clearly have a huge impact on your loved ones’ future. After all, if you’ve been smart with money all your life you’d be understandably concerned about losing a massive chunk of it when you die. If so, you need to arm yourself

with the facts before you can make smart decisions.

 

The sooner you start to think about this the more options you have. But most leave it too late.

 

Julie Wilson
Julie Wilson
I am a Chartered Financial Planner, and a Director and Practice Manager at PenLife Associates Ltd, Chartered Financial Planners in York. I am a Fellow of the Personal Finance Society – the highest professional qualification available in the UK.

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