As Inheritance Tax receipts hit a record high, discover 3 ways to pass on more of your wealth to loved ones

According to IFA Magazine, the Treasury raised £7.5 billion in Inheritance Tax (IHT) for the 2023/24 tax year. This record-breaking amount represents a 5.6% rise on the previous year.

What’s more, this figure is expected to increase further in the near future, as the IHT-free threshold, known as the “nil-rate band”, is currently frozen at £325,000 until 2028.

There is usually no tax to pay on any inherited wealth that falls below this. Additionally, if you leave your home to your children or grandchildren you could boost your tax-free threshold to £500,000 by using your residential nil-rate band, which is £175,000 (2024/25).

However, your beneficiaries may have to pay IHT – the standard rate is 40% – on any amount of your estate that exceeds these thresholds at the time of your death.

Fortunately, careful financial planning could help you to reduce a potential IHT bill. So, read on to discover three clever ways to avoid your wealth being eroded by IHT and leave your loved ones with as much of your estate as possible.

1. Gift assets to your family during your lifetime

Gifting money during your lifetime could be a helpful way to reduce the size of your estate for IHT purposes. What’s more, you can enjoy seeing your loved ones benefit from your gift.

So, it’s not surprising that this type of gifting has become a popular way for adults in the UK to pass on their wealth. According to the British Retirement Survey 2023, 1 in 10 British adults aged 40 or over have made a substantial gift of this kind during the last three years.

Here are three useful ways to gift money to your family during your lifetime:

  • Annual exemptionYou can give away gifts worth up to £3,000 each tax year (2024/25) without them being added to your estate. If you have unused annual exemption from the previous tax year, you can carry this forward for one year. You can also choose whether to use your exemption on one person or split it between several.
  • Small gift allowanceYou can give an unlimited number of gifts worth up to £250 each tax year. However, you can’t make a small gift to anyone who you have used another gifting allowance on.
  • Gifts for weddings and civil partnerships You can give a tax-free gift to someone who is getting married or starting a civil partnership. The amount you can give depends on your relationship to the recipient. For example, in 2024/25, you could gift up to £5,000 to your child without incurring tax, but only £2,500 to your grandchild or great-grandchild, and just £1,000 to any other person.

An underused yet potentially valuable option is to give “gifts out of surplus income”. According to the Telegraph, only 430 families used this IHT tax break in the 2021/22 tax year, and yet, it could allow you to provide potentially uncapped and ongoing financial support to your family.

To qualify for this exemption, your gifts must be regular payments from income (not capital), and you must be able to maintain a reasonable standard of living while you’re making the gifts.

Beyond the exemptions outlined above, your beneficiaries may have to pay IHT on any gifts you make within seven years of your death. So, if you’re considering using gifts to help reduce a potential IHT charge, it may be sensible to do this sooner rather than later.

2. Boost your pension and pass it on to your loved ones

Your pension may be one of your most valuable assets and it can be a tax-efficient way to pass on your wealth.

This is because money held in a pension is usually considered outside your estate for IHT purposes.

So, if you have other assets to draw on for a retirement income, it might be worth preserving your pension to pass on to loved ones.

You might even choose to increase your pension contributions to bolster the sum you can pass on.

It’s worth bearing in mind that your chosen beneficiary may need to pay Income Tax at their nominal rate when they access your pension. However, this could still be less than they might pay in IHT if you pass your wealth on to them outside your pension.

3. Consider donating some of your wealth to charity

Leaving a charitable donation in your will could not only allow you to support an important cause, but it could also offer IHT benefits for you and your loved ones.

Any money you leave to a UK-registered charity will be free from IHT. So, donating to a good cause could potentially reduce the total amount of your estate on which IHT is payable.

Additionally, if you pass on at least 10% of your taxable estate to charity, the IHT rate your beneficiaries will pay on anything above the threshold will reduce from 40% to 36%.

A financial planner can help you navigate these complex rules and create an estate plan that allows you to pass on your wealth as tax-efficiently as possible.

Get in touch

If you’d like to create an estate plan that allows you to reduce a potential Inheritance Tax bill and pass on more of your wealth to loved ones, we can help. Please email hello@bluewealth.co.uk or call us on 0117 332 0230.

Please note

The content of this newsletter is offered only for general informational and educational purposes. It is not offered as, and does not constitute, financial advice.

Blue Wealth Ltd is not responsible for the accuracy of the information contained within linked sites.

Blue Wealth Ltd is an appointed representative of Best Practice IFA Group Ltd, which is authorised and regulated by the Financial Conduct Authority.

The Financial Conduct Authority does not regulate estate planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Workplace pensions are regulated by The Pension Regulator.

Blue Financial Group Ltd (“We”, “Us”) is committed to protecting and respecting your privacy. This Privacy and Cookies Policy (“Policy”) (together with and any other documents referred to therein) sets out the basis on which the personal data collected from you, or that you provide to Us will be processed by Us. Please read the following carefully to understand our views and practices regarding your personal data and how We will treat it.

For the purpose of the General Data Protection Regulation (“GDPR”) and the Data Protection Act 2018 (collectively the “Data Protection Laws”) the Data Controller is Blue Financial Group Ltd.

We are an authorised representative of the Best Practice IFA Group Limited (“Best Practice”), who assist Us with various aspects of our compliance activity, including FCA compliance, AML checks and data protection. In order that Best Practice can provide these services, We are required to send across personal data We have collected. More information about how Best Practice will use your personal data can be found in their Privacy Notice at https://www.bestpractice.co.uk/best-practice/privacy-policy.

YOUR PERSONAL INFORMATION

Information we collect from you

We collect and process some or all of the following types of information from you in the course of providing our services and other information to you and your use of our website www.bluewealth.co.uk:

  • Information that you provide to us by any means, when you request information from us, or provide information to us with the intention of enabling us to provide you with advice and/or ongoing servicing
  • The types of information that you are required to provide to us will vary depending on the products that they are advising you about, but will usually include:
    • your name
    • postal address;
    • email address;
    • telephone number;
    • date of birth;
    • gender;
    • bank details;
    • tax identifiers;
    • other information as required by your chosen product providers or as required by our regulators; and
    • information about your financial affairs, tax affairs, assets and liabilities;and may also include special category personal data relating to:
    • your health
  • If you contact us, we may keep a record of that correspondence.
  • We may also ask you to complete surveys that We use for research purposes, although you do not have to respond to them.
  • Details of your visits to the Website including, but not limited to, traffic data, location data, weblogs and other communication data, and the resources that you access.

The provision of your name, address and date of birth, as well as certain other personal data that We will notify you of from time to time, is required from you to enable Us to advise you and to fulfil our regulatory and legal obligations. We will inform you at the point of collecting information from you, whether you are required to provide the information to Us.

USES MADE OF YOUR INFORMATION

Purposes of, and lawful basis for, processing

We use information held about you for the following purposes:

  • To provide you with our services and to carry out our obligations arising from any contracts entered into between you and Us, including:
    • To send you service, support and administrative messages, reminders, technical notices, updates, security alerts, and information requested by you.
    • To operate, protect and improve Our services, Our business, and Our clients’ experience.
    • To respond to any enquiries you submit to Us.
    • As part of Our efforts to keep Our services safe and secure.Where we have a contract with you to provide our services, and where the processing of your data is necessary to perform such contract, we rely on “performance of a contract with the data subject” as the legal basis for the processing. In all other circumstances we rely on “legitimate interest” and our legitimate interests are improvement of our services and/or prevention or detection of fraud.
  • Where you provide us with special category data, this will be used solely with your consent to research and advise on one or more products to suit your needs and to assist you with applications for and management of such products, and to provide such special category data to Best Practice and third party providers so that they can carry out the services that they provide to Us.
  • To comply with our legal obligations as an authorised representative of an FCA regulated entity, including preparing and sending reports and submissions to Best Practice and/or regulatory authorities such as the FCA. “Compliance with a legal obligation” is the lawful basis on which we rely when we are carrying out regulated activities.
  • To ensure that content on the Website is presented in the most effective manner for you and for the device(s) you use to access and view the Website. In these circumstances we rely on “legitimate interest” and the legitimate interest is the improvement of our services.
  • We also use your personal data where you have contacted Us via the Website, by e-mail or telephone or participated in any surveys. In these circumstances we rely on “legitimate interest” and the legitimate interest is responding to and contacting you regarding the enquiries you have made in relation to the services We offer.

Marketing

In addition to the above uses We may use your information to notify you about goods or services which may be of interest to you. If you do not want Us to use your data in this way, please either (i) tick the relevant box situated on your service charter on which We collect your data; (ii) unsubscribe from our electronic communications using the method indicated in the relevant communication; or (iii) inform Us at any time by contacting Us at the contact details set out below.

DISCLOSURE OF YOUR INFORMATION

We routinely disclose your personal data to third parties as follows:

  • We pass your information to Best Practice, who provide us with various compliance services. Best Practice is a separate data controller, and details of what they do with your data can be found here: https://www.bestpractice.co.uk/best-practice/privacy-policy.
  • We may pass your information to our third-party service providers, agents, subcontractors and other associated organisations for the purposes of completing tasks and providing services to you on our behalf (e.g. to host our servers).

We may disclose your personal data to any member of our corporate group, which means our subsidiaries, our ultimate holding company and its subsidiaries, as defined in section 1159 of the UK Companies Act 2006 (where applicable).

We may also disclose your personal data to third parties:

  • in the event that We sell or buy any business or assets, in which case We may disclose your personal data to the prospective seller or buyer of such business or assets; or
  • if We or substantially all of our assets are acquired by a third party, in which case personal data held by Us about our customers will be one of the transferred assets; or
  • if We are under a duty to disclose or share your personal data in order to comply with any legal obligation, or in order to enforce or apply our client agreement/service charter; or
  • to protect Our rights, property, or safety or that of our affiliated entities and our users and any third party We interact with the to provide the Website; or
  • in relation to selected third parties only, only to the extent that you have consented to such selected third parties notifying you about certain goods or services, which may be if interest to you.

Other than as set out above and save insofar as is necessary in order for Us to carry out our obligations arising from any contracts entered into between you and Us or with any regulatory or other legal obligation, We will not share your data with third parties unless We have procured your express consent to do so.

STORING YOUR PERSONAL DATA

Security

We take appropriate measures to ensure that any personal data are kept secure, including security measures to prevent personal data from being accidentally lost, or used or accessed in an unauthorised way. We limit access to your personal data to those who have a genuine business need to know it. Those processing your information will do so only in an authorised manner and are subject to a duty of confidentiality.

We also have procedures in place to deal with any suspected data security breach. We will notify you and any applicable regulator of a suspected data security breach where We are legally required to do so.

Unfortunately, the transmission of information via the internet is not completely secure. Although We will do our best to protect your personal data, We cannot guarantee the security of your data transmitted to the Website; any transmission is at your own risk. Once We have received your information, We will use strict procedures and security features to try to prevent unauthorised access.

The Website may, from time to time, contain links to and from the websites of our partner networks, advertisers and affiliates. If you follow a link to any of these websites, please note that these websites have their own privacy policies

and terms of use and that we do not accept any responsibility or liability for these policies and terms of use. Please check these policies before you submit any personal data to these websites.

Keeping your personal data up to date

If your personal details change you may update them by accessing this data through the wealth platform portal, or by contacting Us using the contact details below. If you have any questions about how We use data collected which relates to you, please contact Us by sending a request by email to admin@bluewealth.co.uk

We will endeavour to update your personal data within 5 working days of any new or updated personal data being provided to Us, in order to ensure that the personal data We hold about you is as accurate and up to date as possible.

How long we keep your personal data

  • We will hold personal data (e.g. name, address, date of birth and contact details) in line with our regulatory and legal obligations as set out by our regulator – currently a minimum of 5 years for investment business and indefinitely for occupational pension transfer or opt-out business.
  • If you contact Us as a prospective customer using Our e-mail address or via Our Website contact form, requesting general information about our services, We will hold that personal data you choose to provide such as your name, address, e-mail address, for 12 months from Our last point of contact.

Where we store your personal data

All of the information that We hold about you is stored on our secure servers within the EEA.

The data that We collect from you may be transferred to, and stored at, a destination outside the European Economic Area (“EEA”). By submitting your personal data, you agree to this transfer, storing or processing. We will take all steps reasonably necessary to ensure that your data is held securely and in accordance with this Policy. Countries outside the EEA do not have the same data protection laws as the United Kingdom and EEA and We have therefore ensured that any of our suppliers who may transfer your personal data outside the EEA has put in place appropriate measures to protect your data, either by being a member of the US-EU Privacy Shield, or by entering into a European Commission approved contract (as permitted under Article 46(5) of the General Data Protection Regulation).

If you would like further information, please contact Us or the Compliance Director at Best Practice (see ‘Contact’ below). We will not otherwise transfer your personal data outside of the United Kingdom or EEA or to any organisation (or subordinate bodies) governed by public international law or which is set up under any agreement between two or more countries.

YOUR RIGHTS

Under the General Data Protection Regulation you have a number of important rights free of charge. In summary, those include rights to:

  • access to your personal data and to certain other supplementary information that this Policy is already designed to address
  • require Us to correct any mistakes in your information which We hold
  • require the erasure of personal data concerning you in certain situations
  • receive the personal data concerning you which you have provided to Us, in a structured, commonly used and machine-readable format and have the right to transmit those data to a third party in certain situations
  • object at any time to processing of personal data concerning you for direct marketing
  • object to decisions being taken by automated means which produce legal effects concerning you or similarly significantly affect you
  • object in certain other situations to our continued processing of your personal data
  • otherwise restrict our processing of your personal data in certain circumstances
  • claim compensation for damages caused by our breach of any data protection laws.

For further information on each of those rights, including the circumstances in which they apply, see the Guidance from the UK Information Commissioner’s Office (ICO) on individuals rights under the General Data Protection Regulation.

If you would like to exercise any of those rights, please:

  • email, call or write to US or our Compliance Director at Best Practice (see the ‘Contact’ section below for details).
  • let Us have enough information to identify you [(e.g. account number, user name, registration details)],
  • let Us have proof of your identity and address (a copy of your driving licence or passport and a recent utility or credit card bill), and
  • let Us know the information to which your request relates [including any account or reference numbers, if you have them]

HOW TO COMPLAIN

We hope that We or our Compliance Director can resolve any query or concern you raise about our use of your information.

The General Data Protection Regulation also gives you right to lodge a complaint with a supervisory authority, in particular in the European Union (or European Economic Area) state where you work, normally live or where any alleged infringement of data protection laws occurred. The supervisory authority in the UK is the Information Commissioner who may be contacted at https://ico.org.uk/concerns/ or telephone: 0303 123 1113.

CHANGES TO OUR PRIVACY POLICY

We reserve the right to modify this Policy at any time. Any changes We may make to our Policy in the future will be notified and made available to you using the Website. Your continued use of the services and the Website shall be deemed your acceptance of the varied privacy policy.

INFORMATION ABOUT OUR USE OF COOKIES

We may collect information about [your mobile phone, computer or other device from which you access the Website] including where available [your IP address, operating system and browser type], for systems administration [and to report aggregate information to third party affiliates]. This is statistical data about our users’ browsing actions and patterns and does not identify any individual. We may, however, use such information in conjunction with the data We have about you in order to track your usage of our services.

Our Website uses cookies to distinguish you from other users of our Website. This helps Us to provide you with a good experience when you browse our Website and also allows Us to improve the Website. By using our Website, you agree to our use of cookies as more specifically set out below.

A cookie is a small file of letters and numbers that We store on your browser or the hard drive of your computer if you agree. Cookies contain information that is transferred to your computer’s hard drive.

The cookies We use include:

  • “Analytical” cookies. They allow Us to recognise and count the number of visitors and to see how visitors move around the Website when they are using it. This helps Us to improve the way our Website works, for example, by ensuring that users are finding what they are looking for easily.
  • “Strictly necessary” cookies. These are cookies that are required for the operation of our Website. They include, for example, cookies that enable you to log into secure areas of our Website, use a shopping cart or make use of e-billing services.
  • “Functionality” cookies. These are used to recognise you when you return to our Website. This enables Us to personalise our content for you, greet you by name and remember your preferences (for example, your choice of language or region).
  • “Targeting” cookies. These cookies record your visit to our Website, the pages you have visited and the links you have followed to our affiliates’ websites. We will use this information to make our Website, offers e-mailed to you and the advertising displayed on it more relevant to your interests. We may also share this information with third parties for this purpose.

Please note that third party affiliates may also use cookies, over which We have no control.

You may block cookies by activating the setting on your browser that allows you to refuse the setting of all or some cookies. However, if you use your browser settings to block all cookies (including essential cookies) you may not be able to access all or parts of the Website. Unless you have adjusted your browser setting so that it will refuse cookies, our system will issue cookies as soon as you visit our Website.

CONTACT

All questions, comments and requests regarding this Privacy and Cookies Policy should be addressed to Robert Bowers, admin@bluewealth.co.uk or write to Us at 3 Westbury Mews, Westbury-on-Trym, Bristol, BS9 3QA. Or alternatively please contact our Compliance Director at Best Practice IFA Group Ltd, Holmwood House, Broadlands Business Campus, Langhurstwood Road, Horsham, West Sussex, RH12 4QP, telephone number 01403 334455, or via email at info@bestpractice.co.uk