How can I avoid paying inheritance tax of 40%?
Firstly of course you must make a will because Inheritance Tax mitigation is virtually impossible otherwise, except by giving assets or money away during your lifetime and successfully surviving seven years. At the present time every individual has a tax free allowance of £325,000. If the estate is less than that figure then there is no tax payable at all.
Due to a recent change in the law, it is possible that the Inheritance Tax entitlement of one spouse can be passed to a second spouse if any part of it remains unused on the death of the first spouse. This means that in the event of the death of the second partner, a tax allowance of up to £650,000 can be made available to reduce or remove the extent of Inheritance Tax. There is also an exemption from tax relating to any sum left by a husband to wife or vice versa.
Each individual will need to consult in some detail with his or her solicitor on these points. There are other allowances against Inheritance Tax, which can be discussed at that time.
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