What is the best way to cut down inheritance tax?

avoid inheritance taxIf you are going to deal with inherited property, you should have accurate information so that you can save money and cut down the tax to the maximum potential extent. If you know the tips and tricks, you will sell the property at the right time and make changes to the inherited property at the most appropriate time. As long as the inherited property is below £200,000 there will not be much concern. You can learn about safe practices so that you can retain money. However, this should not be misunderstood as evasion of tax.

Selling as per the law

Instead of selling inherited property, you can offer to your spouse or a civil partner as a gift. The gift should be presented at least 7 years before your death so that it will not attract inheritance tax. If you stay in the same house after declaring the main house as gift, you should pay the rent as per the market rate. Thus, you will reap the benefit of inheritance tax. If you fail to pay the rent, the gift will be treated differently and it is understood that you do have monetary benefit without interruption. In order to live in the same property after gifting the same, you are required to pay rent as per the market conditions.

In order to calculate the tax, the value of the inherited property will be taken into consideration. When the property is sold by the children after the death of the parent, the children will attract capital gains tax.

How to sell in a safe way?

In order to sell inherited property in a safe way, you should have clarity on the sale process. In order to reduce the inheritance tax, you can offer annual family gifts. It is possible to offer gifts to your children, family members and friends. The gifts presented will not be counted under the ‘7 year’ rule. Even though it is not a big amount on individual basis, it is possible to shed lot of amount over a period of time. You can present a maximum of £3000 per person.

It is also possible to present wedding gifts to your children. The limit on wedding gift is £5000. When you present a gift, you will get immediate benefit of £5000 and you will also cut down the inheritance tax in future. If a person dies due to injury while serving the military, no inheritance tax will be collected from his estate.

Thus, if you are well aware of various ways through which you can save money, you can sell inherited property with little or no loss. It is very much important to take legal advice so that there will not be any ambiguity in paying taxes. In any case, you should not resort to evade taxes. By proper planning, it is possible to minimize taxes and the inherited money can be used properly as per your needs.

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