Inheritance tax must be paid on your estate when a person dies, ultimately reducing how much of its value can be handed down to their beneficiaries. It can also be levied on specific gifts a person makes when they are alive.
Effective inheritance tax planning, guided by financial advisors, can help make sure that more wealth is passed on to the next generation. Read on for some useful points for your consideration in our inheritance tax planning guide for 2022.
When does inheritance tax need to be paid?
A person’s estate consists of their savings, investments, properties and other material possessions of value like jewellery, vehicles and works of art. Beneficiaries are individuals selected by the person to inherit a portion or all their estate when they die.
While administrative changes were made to the levy in 2022, the UK treasury has frozen the nil band rate until 2026. Inheritance tax must be paid on estates worth over £325,000. As a result, any value of an estate over this limit is taxable by 40%. However, if a person dies leaving their estate to their spouse, no tax is due.
With house prices rising in the UK for 2022, many more people are joining those with a taxable estate. To reduce the future financial burden on beneficiaries, careful tax planning is essential.
How can inheritance tax planning reduce how much must be paid?
Using appropriate investment strategies geared towards preserving capital instead of growing it can generate and even increase funds in a tax-efficient way. Dedicated inheritance tax strategies can be implemented to ensure people hold enough assets for financial security but pass on wealth gradually to their beneficiaries through trusts, gifts and investment-based approaches.
Planning can also help organise a person’s financial affairs and put policies in place that ensure wealth is passed on without paying unnecessary tax, both when they are alive and after they have gone. It can also provide peace of mind for people, knowing that those they leave behind will have sufficient provisions.
Do you need help with financial planning in Chester and Shropshire?
If our inheritance tax planning guide for 2022 has raised financial questions and concerns that are unique to your personal circumstances, we can help. Get in touch with the team at Hartey Wealth Management today for expert advice and mitigation methods that ensure you pass on more of your wealth to the beneficiaries you have selected.