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This Inheritance Tax rate is only applied on the value of an estate that is above a threshold. This threshold is currently £325,000 - however some may be able to increase their threshold.
Usually, there is no Inheritance Tax to pay if the value of the estate is below the £325,000 threshold.
Alternatively, if everything above the threshold is left to a spouse, civil partner, a charity or a community amateur sports club, there will normally be no Inheritance Tax to pay.
Another aspect to be aware of is that it may be possible to increase the threshold.
If a person gives their home to their children or granschildren, this threshold can increase to £500,000.
When those who are married or in a civil partnership with an estate worth less than their threshold are able to transfer any unused threshold to their surviving partner when they die.
READ MORE: Inheritance Tax UK: How rules can affect amount paid in IHT bill
It means that the surviving person can see their threshold reach as much as £1million.
Financial planning may well be the last thing on a person's mind during the ongoing coronavirus crisis, but the pandemic has had an impact financially for millions of people.
What's more, recent falls in equity markets could provide Inheritance Tax and Capital Gains benefits, financial advice firm NFU Mutual has said.
Following the falls in the market, financial planners at the company have pointed out three ways in which Britons may be able to take advantage of them.
Making gifts
According to NFU Mutual, one of the most effective ways to reduce IHT is to make gifts.
"The value of the gift is frozen at the date it is made," the company states.
"Any future growth is outside the estate and if death occurs within seven years won’t be taxable."
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Shedding some light on what this could mean at the moment in time, Sean McCann, chartered financial planner at NFU Mutual, said: “The recent falls in the market may provide an opportunity for those wanting to make gifts, either directly or into trust.
"In the event of a recovery in values, all the growth will be free of IHT.”
Staying in the market and reducing future tax bills
Investors who are currently sitting on capital losses due to share price falls may be able to make use of these losses to reduce tax on any future gains, without coming out of the market, the financial planners have shared.
"In order to create a loss on shares, unit trust, or OEIC, an investor would need to sell part or all of their investment at a lower price than they paid for it.
"But selling also means they risk missing out on any potential recovery.
"The obvious answer would be to sell the shares and immediately buy them back again.
"Unfortunately, HMRC rules mean that selling shares and buying the same ones back within 30 days doesn’t create a loss for tax purposes."
Mr McCann expanded: “There are a number of ways of creating a loss and staying in the market without falling foul of the 30-day rule.
“These include selling shares or a holding in a fund and then buying them back into your ISA or pension, buying a different but similar fund or share, or alternatively, to keep them in the family, your spouse or civil partner could choose to buy them back.”
Losses can be used to reduce future capital gains tax bills.
For example someone selling a buy-to-let property making a gain of £30,000 who chose to realise a £40,000 loss by selling some shares in the same tax year would pay no tax on the gain from the buy-to-let property and could carry forward a £10,000 loss to use in future years.
Any losses in the current tax year are set against gains in the same tax year, which can mean the annual £12,300 exemption is lost. Losses carried forward from previous years can be used to reduce the gain to a level that allows the tax free exemption to be used in full.
Mr McCann added: “The big falls we’ve seen in the markets give the opportunity to create losses that can help reduce tax bills on any future gains from investments and buy to let property.
"It’s important to get advice before taking any action.”