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Planning Ahead: How more people in the UK and avoiding Inheritance Tax

Many people in the UK work hard their entire lives to build up pensions, property, and savings. Increasingly, they are considering how to manage their money before they die to help their families avoid the burden of inheritance tax.

The Rising Awareness of Inheritance Tax Planning

As people accumulate wealth through years of hard work, the thought of a significant portion being lost to inheritance tax is unappealing. This tax, levied at 40% on estates valued over £325,000, can take a substantial chunk out of the legacy intended for loved ones. Consequently, more individuals are seeking strategies to pass on their wealth efficiently and minimize tax liabilities.

Strategies to Mitigate Inheritance Tax

1.             Gifting Assets: One common method is gifting assets to family members while still alive. Gifts given more than seven years before death are typically exempt from inheritance tax, making this a popular strategy.

2.             Using Trusts: Trusts can be an effective way to manage and protect assets, ensuring they are passed on to beneficiaries without incurring significant tax.

3.             Charitable Donations: Donating to charities not only supports good causes but also reduces the taxable value of an estate.

4.             Life Insurance: Some opt for life insurance policies that cover potential inheritance tax liabilities, ensuring heirs do not have to sell off assets to pay the tax.

The Importance of Early Planning

Early and proactive estate planning is essential. By considering these strategies well in advance, individuals can reduce the inheritance tax burden on their families, ensuring more of their hard-earned wealth is preserved for future generations.

Anne Robinson’s Strategic Move to Avoid Inheritance Tax

It has been in the news recently that television presenter Anne Robinson, renowned for her roles on "Countdown" and "The Weakest Link," has strategically distributed her £50 million fortune among her family to avoid paying inheritance tax after her death. In a candid interview with Saga magazine, the 79-year-old explained, “I’ve given it all away. I don’t want the taxman to have it. I’ve spread it about quite a lot, to the children. They may as well enjoy it now.”

Robinson, who resides in the picturesque Cotswolds, has a daughter, Emma Wilson, 53, and two grandchildren, Hudson, 14, and Parker, 13. Her decision comes as inheritance tax, often considered the most unpopular tax in the UK, is imposed at a rate of 40% on estates valued over £325,000. Despite its notoriety, it affects fewer than 5% of estates, according to recent research by the House of Commons.

In the fiscal year 2020-21, HM Revenue & Customs (HMRC) reported that less than 4% of estates paid inheritance tax, contributing £5.76 billion to the treasury. Gifts made more than seven years before the donor’s death are exempt from inheritance tax, while those made within seven years may still be taxable. Additionally, gifts to charities, political parties, or for national purposes are excluded from the net estate for inheritance tax purposes.

For Robinson, the decision to give away her fortune is not merely about protecting her wealth but also about ensuring her family enjoys the benefits now, rather than leaving a significant portion to the taxman.

With a growing awareness of inheritance tax and its implications, more people in the UK are taking steps to manage their finances effectively before they pass away. By planning ahead, they can help ensure that their families benefit fully from the wealth they’ve worked so hard to build, rather than losing a significant portion to the taxman.


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