With rising house prices and frozen tax-free thresholds, more of us are now required to pay inheritance tax, but many of us are not making financial plans for our estate once we are gone. The first step is to take inventory of your assets that have value and will be inherited by family members, including property, shares, even your jewellery. If you own your own home, as well as the usual current £325,000 IHT tax free allowance, you also have an additional £175,000 allowance, so a total of £500,000 per individual or £1 million as a married couple. Anything above this, you should take advice on how to structure your assets tax efficiently in your lifetime to ensure that your loved ones are not hit with a hefty tax liability.

**Gifting your biggest asset in your lifetime - your home**

When you have completed a full inventory of your assets and recognise that your main home may be your most valuable asset, you may consider giving it away before you die or even selling it to loved ones at a price that may be below the market value. Although this will help to reduce the overall value of your estate, your estate being all your assets of value, unfortunately your home may still be included in the inheritance tax calculation if you do not plan properly.

For example, if you legally gift your home to your loved ones in your lifetime but continue to live in the property until you die, your home will still be considered as part of your estate. By gifting your property, you are giving up ownership and residency of your home, and the only way you can remain in the property once gifted is to pay market value rent to the new owner of the property. In effect, you are now homeless and a renter and reliant on your loved ones to allow you to remain in the property.

So perhaps this choice is unpalatable to you and selling your home to loved ones is more appealing, as may downsize for example. Of course, selling your home is fine and privately too is no issue, but selling your property below market value and not getting the property valued by a professional, could cause serious tax complications further down the line when considering your estate’s inheritance tax liability. The difference between the market value and the sale price to your loved ones could be considered a gift for inheritance tax purposes, which could lead to an IHT bill anyway.

Tailored, well considered tax planning advice is essential to ensure any decisions you make to mitigate your inheritance tax liability stands muster with HMRC. Please get in touch for a complimentary consultation if you think you may leave a IHT to your loved ones and you want to act now.

Complimentary IHT Consultation

Gifting in your lifetime

Most of us are aware of the £3,000 tax free cash gift per person per tax year, but there are also other gifting options available in your lifetime to help chip away at the value of your estate over your lifetime. Wedding gifts, cash gifts out of your surplus income, charitable donations, don't get caught out on gifting for IHT and understand the rules.