Possibly one of the most unfair taxes in this country is inheritance tax. And with property prices soaring, more and more people in the UK are likely to be affected, but thanksfully with a little bit of planning you can make sure that more of your estate reaches the right people when you die and not the UK treasurary!

How does Inheritance tax work currently?

Currently if you die and you estate (all of your personal assests) is over £285’000 then your inheritance will be liable to 40% tax. meaning your loved ones will get 40% less than they should.

In April the inheritance tax threshold is rising to £300’000, but this is not nearly enough of a rise! Property prices have nearly double in the last 5 years meaning that 1 in 10 people will be liable to this tax.

What can you do it reduce the amount of tax you on your estate?

Get shacked up! If you are married or in a cival partnership you are entitled to pass as much inhetritance as you want between each other on death without having to pay any inheritance tax.

Buy shares in the AIM At present shares that are listed on the Alternative Investment Market (AIM) are exempt from Inheritance tax as long as they have been held for a minimum of 2 years.

This is the link to the AIM on the London Stock Exchange and there LSE website

A pdf explaining tax relief in the AIM LSE Website

There are a few down sides though shares in the AIM can be especially volatile than fully quoted shares, and shares in general can go up as well as down so their is no guarantee you will get back what you initially invested.

Discretionary Will Trust If you are leaving your inheritance to someone other than your spouse you can incorporate a Nill Rate Band Discretionary Trust into your will. Basically it takes advatage of both £280’000 inheritance tax limits. This raises the limit to £570’000 instead that can be passes on without having to pay inheritance tax. (This is a very general description of a DWT

Here is a useful pdf from friendsprovident explaining in full what a DWT is