Putting together a will can be a daunting task, but it’s a highly necessary one if you want to ensure your money goes where you want it to when you are no longer around.
Making a will is also important as it can help to prevent your family and friends from paying more inheritance tax than they need to.
Putting a plan in place earlier rather than later can keep any unnecessary inheritance tax bills at bay.
Read on to find out how having a will can help with tax planning in the UK.
Why is writing a will so important?
Writing a will is imperative if you want to have control over who gets what and also how much tax is paid.
Without a will, when you die you will have no input in who gets what from your estate and how much tax is payable.
How can you limit the amount of inheritance tax you need to pay?
First of all, it is crucial you work out what assets you have and how much they are worth in order to plan how to avoid inheritance tax.
If your estate is worth over £325,000, you will be required to pay 40 per cent on anything above that threshold.
This will be reduced to 36% if you choose to leave 10% of your assets to a charity.
Giving a gift is one possible way to reduce your potential inheritance tax bill.
Money given as a gift before you die is still counted as part of your estate and therefore subject to inheritance tax, however if you live for over seven years after giving it, you will not have to pay the inheritance tax on it.
This is why early tax planning can be really beneficial.
What are the inheritance tax exemptions?
It is worth noting that there are some exemptions when it comes to inheritance tax.
Any part of your estate that is left to your spouse or civil partner is automatically exempt from inheritance, unless your partner resides in another country.
Also, if you work in a potentially dangerous role and die in active service, you may be exempt from paying inheritance tax.
This includes roles such as paramedics, police, firefighters and armed forces personnel.