How to Turn Income Into an Inheritance Tax Break
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What is the main topic discussed in this episode?
We don't just invest in cutting-edge companies. We look at companies with a history of steady growth and companies whose growth cycle has come round again. Because in the real world, you have to look at growth in three dimensions. Monks Investment Trust.
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Welcome to Merin Talks Your Money, the personal finance edition of Merin Talks Money. In these bonus podcasts, we talk about the best strategies for making the most of your money.
What inheritance‑tax changes are coming in April 2027 and why do they matter?
I'm Meren Samset Webb, UK money editor at large, and this week we are talking inheritance tax. Again. Next year in April 2027, the IH2 rules will be changing again, and more pension pots will become eligible for inheritance tax. However, there are a few things that you can do to reduce your final bills, such as gifting cash to make things as tax efficient as possible. So, first we're gonna have a little chat about the rule changes, and then we're gonna talk about what you can do to reduce. Your final bill. With me today is Sarah Colts, head of personal finance at AJ Bell. Sarah, thank you for joining me. Well, thank you for having me. The point here is not really to talk about the changes to pensions and IHT next year, but it is important because it does mean that a lot more of people's assets are being pulled in to the IHT net, which means that more people will end up being liable for IHT in the first place.
Is is that right?
Yes. And I think, you know, at the moment a lot of people are looking at the different tax rules on pensions compared to other products. And as a result, they're thinking, well, maybe I'll spend my pension last. So I sort of try and keep hold of money in my pension because I know that it's going to be free of inheritance tax. Whereas now that completely changes. It's not just you've got to think about which thing to spend first, but also your estate's going to be much bigger in terms of inheritance tax and there could be a much higher tax bill.
Okay. So people are thinking, well, how do I get rid of some of this money? How do I give this money away? How do I gift it? I mean I hate using gift as a verb, but everyone does now, right? So here we go. How do I gift it away in such a way that I can actually reduce the bill? Because of course the seven year seven year rule stays in place. It has been in place in the UK for Yonks that if you give it away and then you you die within seven years, you still owe the money or you owe a percentage of the money. It falls uh over the over the seven years, right? So you want to get rid of your money as quickly as possible, but you also don't want to end up broke and you don't want to lose control of your money.
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Chapters
8 chapters
1
What is the main topic discussed in this episode?
0:00–2:14
2
What inheritance‑tax changes are coming in April 2027 and why do they matter?
2:14–5:56
3
How can gifting surplus income reduce my future IHT bill?
5:56–8:50
4
What qualifies as “surplus income” for the IHT gift‑from‑income rule?
8:50–12:16
5
What records do I need to keep and how does the 7‑year rule work?
12:16–15:37
6
How can I create more surplus income from cash, investments or property?
15:37–19:14
7
Are purchased life annuities a tax‑efficient way to give away income?
19:14–23:02
8
Do HMRC rules allow me to convert capital into income for gifting?
23:02–24:28
Speakers
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