Inheritance tax: The secret loopholes to help protect YOUR money from dreaded death duties

The amount raked in by HMRC through inheritance duties hit a record high last year, as the tax threshold remains stuck at the same level since 2009.

An additional £100,000 of allowance can be used to reduce the duty paid on a main home.

But increases in stock markets, cash savings and inflation are helping to push more people into the inheritance tax bracket.

This is how you can protect money from the taxman.

*Invest in Aim companies

Certain shares listed on the Alternative Investment Market (Aim) benefit from a tax-break called business property relief (BPR).

And it allows investors to side-step liabilities when they pass on stakes to families and loved ones.

The catch is that stakes must have been held for at least two years.

And smaller companies listed on Aim can be suffer from sharp falls in value.

Some companies offer Aim portfolios that are designed to curb inheritance tax and help balance risks.

*Gift to lower an estate’s value

People can gift as much as they want to beneficiaries to bring estates below £325,000 and avoid inheritance tax provided they live another seven years after the gift.

If you are in poor health, there is also a tax-free annual allowance of up to £3,000 to gift cash or assets to anyone of your choice, which can help bring down the value of an estate.

And unused allowances from the previous tax year can be carried forward to the current year.

Britons can also give as much money or assets to a spouse without incurring any tax before or upon death.

On top of this, an unlimited number of gifts up to the value of £250 can also be made to any number of people.

Another option for parents and grandparents can make a one-off marriage cash or asset gifts to children of up to £5,000 or grandchildren of up to £2,500.

Income can also be given away, limit-free.

People who are don’t want beneficiaries to receive cash or assets yet can make gifts to a trust and specify a payout date – which also starts the seven-year clock.

*Buy life insurance

An easy way to cancel out inheritance tax is with life insurance for the value of the bill.

The payout can then be used to pay any liabilities and allow beneficiaries to receive the value of an estate in full.

However, it’s important to make sure the policy written into trust so that the payout is tax free.

*Use a pension

A pension can be passed on without incurring tax, as long as death is before the age of 75.

This can makes pension scheme more favourable over other savings account, including ISAs.

Seeking independent financial advice can help people make the most of tax rules to limit tax liabilities.

Daily Express :: Personal Finance Feed

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