Inheritance tax: Graham Southorn explains how trusts can help
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As many more people are caught in the net, many Britons will be wondering how they can reduce their bill. IHT is paid on the estate of someone who has died, including all property, possessions and money.
Everything over the threshold, which is £325,000 but can be increased in some instances, is taxed at 40 percent.
IHT receipts are £300million higher than at the same point last year.
Britons are encouraged to use a Will as a way to save money on their hefty bill.
Mark Greer at Charities Aid Foundation said: “For many donors, leaving money to charity in a Will can be a way to give a far more substantial donation than they ever could in their lifetime.
Mr Greer gave an example. For instance, a £100,000 gift to charity from a £1million estate only ‘costs’ the beneficiaries £24,000.
Gifts in Wills can therefore make a difference to the causes that donors care about the most, whilst having a positive impact on the remainder of their estate.
He continued: “Leaving money to charity in a Will can have a significant impact on both an individual cause and help to accelerate progress in society.
“Every year, the Charities Aid Foundation (CAF) donates over £20 million to a variety of causes on behalf of our legacy clients.
“An increase in gifts in Wills could increase funds for charities at a time when they are being hit hard by increasing demand for their services due to rising living costs affecting families, alongside falling donations.
“It is recommended that donors speak to a professional tax advisor for independent advice if they are looking to reduce their inheritance tax through charitable legacies.”
He reminded Britons that giving to charity can reduce the IHT bill on the rest of their estate.
Britons are urged to make use of all the exemptions that are available to them as it can also reduce their bill.
There are several allowances for gifts which are automatically exempt from IHT.
Every year people can gift £3,000. This allowance can be carried forward one tax year if unused.
People can make unlimited small gifts of £250.
Gifts between spouses or for the maintenance of children, ex-spouses or dependent relatives are also exempt.
Gifts to people getting married are exempt up to £5,000 for someone’s child, £2,500 for your grandchild or great-grandchild, and £1,000 for anyone else.
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