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Poor inheritance tax costs the UK taxpayer billions

A recent report reveals that UK taxpayers will pay £1.3bn this year ‘due to poor inheritance tax (IHT) planning’. ‘With the IHT threshold frozen for another three years, it is important to make sure your financial affairs are in order to protect your loved ones after you’ve gone. Enables Independent Financial advisors are here to help every step of the way.  There are 5 main ways to manage your Inheritance tax liability.  Enable will look at the options in more detail over the next few weeks.

1. Claim a partner’s unused IHT allowance
Married couples and Civil Partners can boost their IHT-free allowance by claiming any ‘nil-rate band’ their deceased partner has not used.

2. Reduce your estate by making tax-free lifetime gifts
Gifts made during your lifetime can reduce the size of your estate substantially, but there is a limit to how much you can give away tax-free in a single year.

3. Reduce your estate by making potentially exempt transfers
Larger lifetime gifts may escape IHT but only if you live for seven years after making them. Known as potentially exempt transfers (PETs), they are added back into your estate if they ‘fail’.

4. Insure against inheritance tax
If you think your heirs might be faced with IHT, you can take out a whole of life insurance policy to cover the likely bill.

5. Make gifts to charity
Gifts to charity reduce the size of your taxable estate. From April 2012, they can also reduce the rate of IHT your heirs have to pay.

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