Published on: 17th February 2025

How to reduce Inheritance Tax

In recent years, family estates liable for Inheritance Tax (IHT) are rapidly on the increase. The rise in the value of properties in particular means that many more "ordinary" people have to deal with the complexity of IHT planning.

Currently, the IHT threshold means that people pay tax on estates worth £325,000 or more. However, the introduction of the Main Residence Allowance (MRA) in 2017, which started at £100,000 but now stands at £175,000, is of enormous benefit to those whose estate value exceeds £325,000, providing they are leaving their family home estate to their children or descendants thereof. This means that married couples and civil partners can pass on £1 million to their beneficiaries without their estate paying any IHT.

Because of the rise in the value of estates, more and more people are looking at ways by which they can mitigate IHT and some of the main strategies are as follows;

• Gifting: Each person has a gifting tax-free annual allowance of up to £3,000 per year which can be passed on to their children. If the gift is more than this amount, the person must live for seven years after the gift has been made before the assets will be exempt from IHT.
  
  
• Setting up a Trust: This is where a legal agreement is created in which assets are given to a certain person to look after on behalf of the original owner or Trustee. There are different types of Trusts which carry the same restrictions as with gifting, including the same seven-year qualifying period. Creating a Trust could be a more expensive option when it comes to IHT planning as the client has to get legal and financial advice throughout the process.
  
  
• Business Property Relief: Investing in companies that qualify for business property relief (BPR) can be an efficient way to mitigate IHT. BPR provides shareholders in qualifying companies with 100% IHT relief upon death. It takes two years for BPR-qualifying shares to become exempt from IHT.
  
  
• Platforms: Platforms and investment companies work together to provide clients with access to packaged IHT investment solutions such as portfolio services. These work by providing advisers with access to a discretionary portfolio or certain companies that qualify for BPR, which allows shareholdings to be exempt from IHT.

With soaring property prices resulting in a sharp increase in the number of families liable for IHT, the changes to IHT legislation and, in particular, the introduction of the MRA, means that there is more people can do to maximise the inheritance for their children and grandchildren.    wever, this also means that more people are going to require assistance with the technicalities of implementing IHT-mitigating strategies.

Casey & Associates can assist with a number of strategies by which to mitigate IHT and, when it comes to the actual payment of IHT, we recommend using a tax specialist to ensure that all tax work is dealt with correctly. We can assist to reduce the IHT a Client’s estate has to pay and we can also deal with the whole estate administration process on our client's behalf.

If you would like to speak with one of our Consultants to discuss any of the issues raised in this article or any other estate planning topic please telephone 01732 868190 or click here.

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If you wish to give instructions or require general information about our Wills, Lasting Powers of Attorney, or Trusts then we will carry out a telephone or Zoom appointment.

owever, if you wish to give instructions to one of our Consultants and you feel that you can only do this at a Face to Face meeting then we are offering, at our Consultant’s discretion, a limited number of Face to Face appointments in most of the areas we normally cover. To see the areas we normally cover please click here.

o arrange an appointment please telephone 01732 868190 or click here.

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