Inheritance tax alert as Britons could slash IHT bill and give ‘boost’ to grandchildren
Inheritance tax is a bill many people will want to avoid upon their death, as it could restrict the amount their loved ones may inherit and pass money to the taxman.
Britons could slash their inheritance tax bill while providing important support to their grandchildren. The tax is set at 40 percent of the value of a person’s estate above a particular threshold, usually £325,000. The tax is set at 40 percent of the value of a person’s estate above a particular threshold, usually £325,000.
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With the tax year end rapidly approaching, experts have stressed the importance of Britons making the most of the allowances available to them.
This is because many of these allowances are “use it or lose it”, meaning after April 5, 2023, they could be lost.
The same goes for the allowances available to a person’s children and grandchildren as well.
One expert has said there is a particular savings method which could help people reduce their tax, as well as helping other generations.
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This is a Junior ISA or JISA, which can be set up by a person on behalf of their children or grandchildren.
The account is often seen as a good way to help adults gear younger people up for a more financially secure future.
However, it could also assist in making sure no more hard-earned cash ends up in the taxman’s pocket than is necessary.
Rachael Griffin, tax and financial planning expert at Quilter, said: “While most people are aware that they can pay £20,000 annually into an ISA, the £9,000 JISA allowance is perhaps not as widely known.
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“This allowance cannot be carried over, so it is important to make the most of it before it is too late.
“Anyone can top up a child’s JISA, not just those with parental responsibility.
“This means that parents, grandparents, friends or other family members can contribute, as long as the total stays under the annual allowance.
“Naturally, not everyone will be able to maximise the JISA allowance, but even modest top ups could give your child or grandchild an excellent head start in life.”
While saving into a JISA can help give a boost for a family member's future, it can also help to reduce a person’s IHT bill in the longer term.
This is because a person is making use of the gifting allowances available to them.
Ms Griffin continued: “Each tax year you can give up to £3,000 with your annual gifting exemption, or £6,000 as a couple, free of IHT.
“You can carry any unused annual exemption forward to the next tax year – but only for one tax year.
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“This means that if you and your partner did not use your gifting allowance in the 2021/22 tax year, you could gift as much as £12,000 between the two of you this tax year, and can then gift a further £6,000 from April 6.
“While the JISA allowance is £9,000 a year, this could be particularly useful if you have more than one child or grandchild.
“In addition, there is no limit on excess income – above normal expenditure – that can be gifted.
“It may be worth considering what you are able to put away for your child or grandchild on a more regular basis going forward, as well as how you might make the most of the available JISA allowance ahead of tax year end.”
Of course, this method of saving may not be suitable for everyone, so it is important to consider one’s financial circumstances carefully.
