Inheritance Tax Gift Allowance: How Can You Reduce The Burden?


All parents want to leave their children a better world than they were given. But how? How do you make sure that your children are set for life without breaking the bank? It is important to know what the inheritance tax gift allowance is and how it will benefit your family.

What is an inheritance tax gift, and what are its benefits?

An inheritance tax gift is a voluntary donation you make to your estate during your lifetime. This can reduce the inheritance tax you will pay on the value of your estate.

Here are some benefits of making an inheritance tax gift:

  • It increases the value of your estate and reduces the amount of inheritance tax you will have to pay.
  • It reduces the amount of taxes that will have to be paid by other beneficiaries of your estate, such as your spouse and children.
  • Not only that, but it enables you to make a more personalized gift, which may be more appreciated by your family.

How to avoid inheritance taxes and possibly reduce your taxation bracket?

The inheritance tax is a tax that is charged on the passing of property, including savings and investments, to individuals who are not the direct descendants of the original owner. The inheritance tax is levied at 40% on the value of assets over £150,000, with a lifetime allowance of £325,000. 

There are a number of ways in which you can avoid inheritance taxes and potentially reduce your taxation bracket. Below, we outline some of the most common methods: 

1) Make a gift to charity: This is one of the simplest and most tax-efficient ways to avoid inheritance taxes. By giving your assets to charity, you will be able to reduce their value for inheritance tax purposes. This will also increase the amount of money that goes towards charitable causes, benefiting society as a whole. 

2) Use an estate planning trust: An estate planning trust is a legal structure that can be used to pass assets on without paying Inheritance Tax. By creating an estate planning trust, you can appoint a trustee who will manage the assets while they are still owned by you, but without paying Inheritance Tax on them. This will save you significant amounts of money in Inheritance Tax fees. 

3) Donate assets to charity: Charitable donations are worth £5,000 per individual or £10,000 for a couple. This money can be used to fund many good causes and charities such as Sure Start centers, hospices, schools, and hospitals. Making a donation will reduce the value of your assets and so increase the amount that you may receive under the Inheritance Tax rules. 

For more information about how gift taxes work and what kind of gifts are exempt from them, read our guide below.

Gift Taxes Explained

If you want to give someone money with no strings attached, then you can do so without worrying about gift taxes. However, if you want to give someone money with strings attached (i.e., money that is tied to a gift tax), you will want to be aware of one thing: staying on the right side of the law. A gift is a transfer of an item from one person to another, with no consideration or return. If you make a gift and your loved one does not receive anything in return, it’s considered a gift. If there is something in return for the gift (i.e., money), then that transaction has already been passed through the economic system with two parties involved, and therefore triggers a tax liability for both people. 

What happens when there are no surviving family members?

When there are no surviving family members, the gift allowance can be used to reduce the taxable value of any inheritance received. This is true even if the deceased person did not specifically mention the gift allowance in their will. 

Tips on how to be successful before giving your money away

If you are considering making a gift to someone in your family, there are a few things you should keep in mind. First, make sure that the person you are giving to is aware of the gift and wants it. Next, decide how much money you want to give and what type of gift would be the best fit for the recipient. Lastly, follow these tips to make sure your inheritance tax gift allowance will be enough and that the gift will be properly taxed. 

When you make a gift to someone in your family, it is important to be clear about what you are giving. If the person you are giving to do not know about the gift, it is possible that they will not receive it, or they may not appreciate it. It is also possible that they will spend the money without asking you first. If this happens, you may end up owing taxes on the money you gave them even if they do not use it. If you want to make a larger gift, it is important to talk with your loved ones about what kind of gift would be best suited for them. 

There are a few things you can do to reduce the inheritance tax burden on your estate. Below are some tips to help you get started:

→ First and foremost, be sure to consult with a tax professional to determine if any of your gifts qualify for tax breaks. This includes using the gift allowance calculator on the IRS website or speaking with an accountant.

→ Secondly, consider making larger gifts over time rather than lump sum gifts. This will reduce the overall amount of inheritance tax you will have to pay.

→ Finally, consider gifting assets that have appreciated in value over time, such as real estate or stocks, to reduce the impact of inflation on your estate’s taxable value.


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