How to reduce your inheritance tax liability

If you think that your estate may be liable for inheritance tax, there are things you can do to reduce the amount payable.

Inheritance tax

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Make a gift to your partner

If you are married or in a registered civil partnership, you can gift anything you own to your spouse or partner and no inheritance tax will be due. The rules are slightly different if your spouse or partner was born or lives outside the UK, so it would be worth getting advice on this before going ahead.

Give to family members or friends

If you make a gift to a friend or family member who is not your spouse or civil partner – provided that you no longer use it or benefit from it – the amount will still be included in your estate, but only for seven years. You can also give away limited amounts each year on which inheritance tax will not be due. Be aware that there may be capital gains tax to pay on some assets; again, getting advice before going ahead would be a good idea.

Put things into trust

If you put investments, property or cash into a trust, it is similar to a gift in that you, your partner/spouse or children under 18 years of age cannot benefit from them. Items in a trust are no longer part of your estate for inheritance tax purposes.

Inheritance tax

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Trusts can be set up whilst you are living or in your will; however, the rules are complicated and other types of tax may be due. Seeking advice from an independent financial advisor (IFA) is highly recommended. An IFA with the leading back office systems for IFAs in place from a provider such as will not only be able to advise you but also help you to source the appropriate products.

Leave to charity

If you leave 10 per cent of your estate to charity, the inheritance tax rate reduces to 36 per cent on the remainder. This may not be a large saving, but it can mean that your beneficiaries receive more than they would otherwise and your favourite charity benefits.

Arrange life insurance

Although having life insurance won’t reduce the inheritance tax liability, it won’t increase the value of the estate as long as it is in trust and can help your family to pay the tax bill.