We all know it’s going to happen, but it’s still easy for people to sideline thinking about making preparations for death. It’s even easier to lay off thinking about estate planning when you’re young; after all, not many people plan for the unexpected. But therein lies the trouble, because your passing can carry extreme financial burdens onto loved ones, and preparing early is the only way to ensure that doesn’t happen.
The best way to reduce the inheritance tax in the UK is by working with your financial advisor to get solid advice, and then a financial firm, such as Globaleye, can help you with estate planning.
With pensions not holding out and rising costs of health care and real estate, more income at an older age, in order to compensate for the disparity, is a necessity. Therefor, early planning and saving becomes almost obligatory.
The inheritance tax can be complicated to fully comprehend, as with most tax laws, there are many exceptions and stipulations that can vary for each individual depending on their financial situation.
Here are some of the most noteworthy aspects of the UK’s inheritance law:
- The Nil Rate Band is set at 325,000 GBP, meaning that if all of your assets don’t exceed that amount, there is no tax to pay. And remember, everything you own is included in your estate – cash, property, shareholdings, etc.
- Married couples can transfer their nil rate to the other spouse, rising the cap to 650,000 GBP where tax is not payable, and the limit is set till 2018 at the least, when the government will have to see about extending the legislation.
- Anything above the nil rate is taxable at 36% or 40%, depending on if you donate a minimum 10% of your assets to charity.
- When it comes to early planning, gifting is the perfect example of why it’s important to plan early. You’re allowed to give up to 3,000 GBP per tax year in gifts, but the stipulation is that you must still be surviving seven years after or the amount will not be exempt from the inheritance tax.
- You can also carry over your gift amount to the next year if it wasn’t used – so in the following tax year, 6,000 GBP would be the limit. And normal gifts are automatically exempt as long as they are in line with your normal expenditure rate.
- Donations to certain community organizations, charities, and political parties are also exempt from your estate tax, and fortunately do not carry the seven years of life stipulation.
- The small gift exemption allows for 250 EGP to be gifted to an unlimited amount of individuals in any and every tax year.
- Trust funds are an excellent way to ensure your family doesn’t needlessly lose the things you wanted to pass on. You can put virtually any asset under a trust and have someone else watching over it once you pass, or in your name under a living trust, which, is not included in the inheritance tax. For trusts, there are many options and variables that one can take into account, and Globaleye Dubai is there to help you through the entire process so that you are at peace of mind when it comes to ensuring your family is taken care of.
- Regardless if you’re a primary income earner in your family or not, life insurance is a simple and important way to make sure your family isn’t crippled by expenses due to losing a chunk of dependable income. Plans vary depending on how much you earn and how much you’re willing to pay for a premium, but there are plenty of affordable options and this is one thing that absolutely can’t be overlooked.
- Lastly, pensions generally aren’t involved in the IHT sphere because employers will usually cease payments after death, unless otherwise noted in a prior contractual agreement.
Overall, navigating the labyrinth of estate planning can be a daunting, if not a stressful and confusing, task. Knowing how and where to invest your hard-earned money (and starting early) is absolutely crucial in guaranteeing your family will be financially stable if the worst were to happen. So talk to a financial adviser at Globaleye today.