How much can I inherit without incurring Inheritance Tax?

When you die and leave money or possessions to your loved ones, Inheritance Tax (IHT) may be due on what you leave in your estate. But the tax owed will depend on everything from the overall amount you leave, to who your beneficiaries are and how you leave it to them.

As with all tax issues, working out what you may owe can be complicated. But, by speaking with a trusted adviser such as Grosvenor Wealth Management, you can develop an effective strategy that enables you to create an IHT-efficient plan.

How much IHT will be owed?

The amount of Inheritance Tax that’s due will depend on everything from the value of your estate, to whether you’re single, married or in a civil partnership. It will also include things like gifts you have made over the previous seven years, their value and how you gifted them.

If your total estate, including all property, assets and cash, is worth less than £325,000, or you give everything above £325,000 to your spouse, civil partner, a charity or a community amateur sports club, then no IHT is due at all.

Also, if you pass on your house to your children or grandchildren, your estate can be worth £500,000 before IHT is paid. And if you’re married or in a civil partnership and your estate’s worth less than the relevant threshold, your spouse or partner can add the difference between the value of your estate and the threshold to their own threshold. So, in theory, their threshold could be up to £1 million before any IHT is due.

Reducing your IHT tax liability

As well as your personal threshold, HMRC also make a number of allowances to reduce the amount of IHT you pay. For example, any money passed to a beneficiary from a pension fund is exempt from IHT, as long as it meets certain criteria.

If you own a property, you could decide to pass it on to your grandchildren, rather than your children. In some cases, this can be beneficial because it could avoid having to pay IHT twice on the same property, if your children then pass it on to your grandchildren when they die.

It’s important to remember that your annual gift allowance means you can only pass on assets worth up to £3,000 in any tax year. Annual gifts up to the value of £3,000 are IHT free. Anything worth more than this will incur IHT. So, if they’re worth more than £3,000, you need to think carefully before gifting them.

Talk to us

As with all tax matters, the best approach needs to factor in your individual needs and circumstances. So, it’s always a good idea to talk to someone who understands the complexities that surround efficient IHT planning. To find out about the potential advantages and disadvantages of the options we’ve covered here – and other potential alternatives – call us to speak to one of our experienced financial advisers.

PLEASE NOTE: Grosvenor Wealth Management Ltd is authorised and regulated by the Financial Conduct Authority. The value of investment can go down as well as up and you may not get back the original amount you invested. Tax treatment is dependent on individual circumstances and may be subject to change. Tax planning is not regulated by the Financial Conduct Authority.