Inheritance tax: Britons urged to use ‘extremely tax efficient’ savings option to lower their bill | Personal finance | Finance

Recent data from HM Revenue and Customs (HMRC) revealed that IHT revenue for the previous tax year was £6.1bn. This is a steep 14% increase on the previous year and an increase of £729m.

For the 2019-20 tax year, average inheritance tax has increased by £7,000, from £209,000 to £216,000.

Inheritance tax (IHT) can cost family and friends thousands when a loved one dies – but there are ways to legally ensure that people leave as much as possible to loved ones when the time comes.

“Planning is key – it’s never too early to do it,” says one expert. spoke exclusively to Stevie Heafford, partner at accounting firm HW Fisher, about how Britons can use their pensions in a tax-efficient way.

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She explained that with zero-rate tranches of the IHT frozen for the next few years, it’s more important than ever to make sure someone’s affairs are in order.

This will help keep more of their hard-earned assets out of the taxman’s clutches.

When it comes to long-term savings, pensions are now extremely tax-efficient upon death. There is usually no IHT to pay and it is even possible to pass on one’s pots tax-free to their designated beneficiaries if they die before age 75.

She stressed that people should “maximize their savings”.

Ms Heafford said: “Most pension pots do not fall within the estate for estate tax purposes and can therefore be passed on free of estate tax on death.

“This contrasts with other investments such as bank accounts, ISAs and wallets. While ISAs provide the opportunity for tax-free growth and income, they still fall within the taxable estate upon death and are subject to estate tax at that time.


Ms Heafford continued: ‘However, there may be other tax burdens associated with passing on pensions depending on the type of pension it is, how you receive the pension and the age of the pension. deceased person.

“For example, if you receive a lump sum payment and the pensioner was under the age of 75 when they died, you will generally pay no tax.

“If you receive a lump sum but the pension holder was over 75 at the time of death, you will generally be subject to income tax which will be deducted by the recipient.”

If transferring money to loved ones is important to someone, it is worth checking where their assets are held to ensure they are not exposing more than necessary to the IHT.

Britons are reminded that it may be worth considering speaking to a qualified financial adviser to understand their options.

They will have to pay a fee for their services, but often their expertise in navigating the tax maze will save families thousands of pounds.

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