020 3740 5856

Contact us today

If you have a query for us, please fill in this short form. We aim to respond within a few hours. 

Request a call back

If you would like to talk with one of our advisers at a time that is convenient to you, please fill in this short form.

Contact Sterling and Law

If you have a query for us, please fill in this short form. We aim to respond within a few hours.

Many believe this to be an unfair tax, arguing that after paying tax on their income and spending during their lifetime they now have to pay tax again on death.

Article by Akwasi Duodu

If your estate is large enough, your beneficiaries may be charged inheritance tax after you die. Many believe this to be an unfair tax, arguing that after paying tax on their income and spending during their lifetime they now have to pay tax again on death. Whatever you believe, you have two choices. Acceptance or action. here are 10 effective ways to help you avoid paying inheritance tax.

1: Gift your house to your children

Gifting your house to your children can be a strategy to avoid inheritance tax. However, this is fraught with problems, so it is important to seek professional advice to understand the implications.

Related reading: Can I gift my home to my children to avoid inheritance tax?

2: Make use of the spouse exemption

Leaving assets to your spouse or civil partner is another way to avoid inheritance tax. This exemption allows your surviving spouse to use their own inheritance tax allowance, effectively doubling the amount of your assets that can be passed on tax-free.

3: Benefit from the residence nil-rate band

The residence nil-rate band offers an additional inheritance tax allowance when you leave your home to direct descendants. This band, currently at £175,000 per person, could significantly increase the threshold and provide additional tax relief.

4. Consider equity release

If you meet the qualifying criteria, equity release offers those who qualify the opportunity to unlock cash from your property.  Furthermore, if you release equity from your home, the size of your estate reduces, reducing the amount of IHT due on your estate.

Sound interesting? Read our article on whether equity release be used to reduce your inheritance tax bill.

5: Use trusts

Placing assets in a trust removes them from your taxable estate, allowing you to benefit from them during your lifetime and pass them on to future generations while reducing tax. If you need the advice of a specialist, find out more about our estate planning services today.

6: Explore life insurance options

Life insurance policies could provide funds to cover your inheritance tax bill, preventing the tax from diminishing the value of your estate. However, proper planning is necessary to remove the insurance proceeds from your estate for tax purposes.

7: Make gifts out of income

Regularly gifting surplus income could reduce your inheritance tax bill. These gifts should not affect your standard of living and should come from regular income rather than savings or capital. Keeping records of these gifts is important to comply with the rules.

8: Consider business property relief (BPR)

Investing in certain business assets, such as shares in unquoted companies and qualifying business property, could provide business property relief. This relief either exempts or reduces the taxable value of these assets, making it an attractive strategy for minimising inheritance tax.

9: Explore relocation opportunities

Relocating to a country with more favourable tax rules, such as Portugal or Spain, could help reduce inheritance tax. However, careful consideration of costs and compliance with the regulations is essential when considering this strategy.

10: Use the annual gift exemption

Taking advantage of the annual gift exemption allows you to gift up to £3,000 each year without incurring inheritance tax. This cumulative allowance can be used to pass on substantial amounts over time, providing a tax-efficient way to benefit your loved ones.

Room for one more?

11. Consider charitable donations

Making charitable donations during your lifetime or including them in your will can reduce inheritance tax liability. Gifts to charity are exempt from tax, allowing individuals to reduce the taxable value of their estate while supporting causes they care about.

Looking to avoid inheritance tax? Seek professional advice

So there you have it – a whole host of effective ways to avoid inheritance tax in the UK.

Engaging the services of an inheritance tax planner is crucial for proper guidance tailored to your specific circumstances. A qualified professional would help review your estate planning arrangements, identify areas for improvement, and ensure compliance with the relevant laws and regulations.


Share this article:

Subscribe to our newsletter

Request a Free callback