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Make the most of gifting to cut your inheritance tax bill

Giving money away in your lifetime is an easy way to mitigate IHT, but the rules can be fiddly
July 16, 2024
  • Only give away money if you are sure you can afford to
  • There are multiple rules and allowances that apply in different situations
  • You can give as much as you like from your regular income

Giving away money during your lifetime is the most straightforward way to reduce your inheritance tax (IHT) bill, and it's becoming increasingly important to plan for this eventuality. More middle-class families are getting caught by the tax as inflation reduces the real value of the tax-free band, and the future of tax reliefs under the new government is as-yet unknown.

Currently, you don’t pay IHT if your estate is within the tax-free threshold of £325,000 per person, increasing to £500,000 if you give away your home to your children or grandchildren. A married couple can pass on a maximum of £1mn free of IHT. Anything above the tax-free threshold is taxed at a rate of 40 per cent. 

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