How To Avoid Inheritance Tax With A Gift

How To Avoid Inheritance Tax With A Gift

Avoid Inheritance Tax

If you are planning on gifting a property or assets to someone, it is important to do so before you die in order to avoid inheritance tax. You can also designate a beneficiary to receive the property on your death if you want. This way, you will not have to worry about any taxes when the property is passed on to the beneficiary.


The vast majority of people won’t have to pay inheritance tax when they die, as long as their estate is under £325,000. However, there are a few steps you can take to reduce your chances of having to pay tax on your inheritance. If you want to minimize your inheritance tax bill, the first step is to make sure that it’s actually yours – any gift or inheritance you receive could be taxable. Secondly, don’t use too much of your estate to reduce your taxable income – this could lead to a large bill at death. And finally, if you can afford it, try and make gifts over the course of your life rather than at once – this will mean that your estate pays less in taxes on the overall amount.

What is Inheritance Tax?

An inheritance tax is a tax that is paid by the inheritance recipient when they receive an inheritance. The inheritance tax rate varies depending on the deceased’s estate size, but it typically ranges from 0% to 40%, although there are some exceptions. Some methods of avoiding inheritance tax include gift splitting, making charitable donations in advance of your death, and medicating your assets before you die.

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What are the Different Types of Inheritance Taxes?

There are three types of inheritance tax: death, age, and gift. 

Death inheritance tax applies when an individual dies and leaves behind a taxable estate. This includes assets such as property, businesses, and money. The maximum amount an individual can Inherit is £325,000 (2013/14). 

Age inheritance tax applies when an individual dies and leaves behind a taxable estate regardless of the value of the assets. This includes assets such as property, businesses, and money. The rate of inheritance tax is 20% for individuals who are over the age of 75 at the time of their death, 10% for individuals aged 55 to 64 at the time of their death, 5% for individuals aged 45 to 54 at the time of their death, 3% for individuals aged 35 to 44 at the time of their death, and 0% for individuals under 35 years old at the time of their death. There is no inheritance tax on transfers between spouses during their lifetime. 

Gift inheritance tax applies when an individual makes a taxable gift (defined as any transfer that costs or gives up something worth more than £5,000). The recipient does not have to be related to you – they can be a friend, family member, or even complete stranger! The first £325,000 (2013/14) will be free from Inheritance Tax but anything above this will be taxed at 40%.

How to Avoid Inheritance Tax With a Gift

Many people believe that gifting their property to someone else will avoid inheritance tax. However, this is not always the case. Inheritance tax is based on your estate’s value at death. If you give away an asset worth more than the annual allowance, then you will have to pay tax on it. 

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There are a few steps that you can take in order to reduce the amount of inheritance tax that you will have to pay, however. Firstly, consider using life insurance to create a beneficiary who will inherit your assets free of charge. This way, the estate won’t be burdened with any debt and the beneficiary won’t have any taxable income until they use it. 

Alternatively, you could make a gift directly to the charity instead of giving it away to your loved ones. This way, the money donated won’t be subject to inheritance tax and can help benefit many people in need. Overall, it’s important to keep in mind that there are many ways to avoid inheritance tax without having to give away all of your property.


If you are planning to give someone a substantial gift in the near future, it is important to understand how inheritance tax works in order to avoid paying too much. A lot of people make the mistake of thinking that because they are not the primary beneficiary, they don’t have to worry about inheritance tax. The truth is that you may still have to pay inheritance tax on any gifts worth more than £325,000 ($450,000 CAD), even if the person who will receive the gift is not your spouse or child. So it is important that you work out a plan with the recipient beforehand and get their consent for any gifts over this limit.

Vipul Rai