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How to plan for inheritance tax

The What Investment Guide to Personal Tax 2012-2013 offers advice on the best ways to reduce your inheritance tax bill:

If your estate is likely to be well below the threshold for paying inheritance tax, there is no need to worry about it. But if it looks as if you are above it, there is much you can do to reduce the tax bill. An important first step is to draw up a will. This will make you think about what you own and how you want it to be disposed of after you die.

Many of the ways of minimising inheritance tax involve making gifts that are free of tax or making potentially taxable gifts more than seven years before your death. But remember your heirs will still gain from what you leave them even if tax is due on your estate. Don’t give away so much that you or your spouse are left impoverished in old age, merely to starve the Revenue of every last penny of tax.

Draw up a will. There are simple steps you can take to minimise the tax payable on your estate when you die and to reduce the complications for those you leave behind.

Make as full use as possible of the lifetime gifts you can make which do not fall into the inheritance tax net, such as those which count as normal expenditure from income or fall within the £3,000 annual allowance.

Share your wealth with your spouse or civil partner so that you can each make tax-free lifetime gifts and efficient wills. There is no inheritance tax or capital gains tax on gifts between spouses or civil partners.

This article was an excerpt from The What Investment Guide to Personal Tax 2012-2013 which can be purchase here.

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