Give away more before you die

One misconception about inheritance tax (IHT) planning is the belief that the £3,000 IHT annual exemption is the most you can give away in one year. In fact, there's no limit, says The Schmidt Report. "You just have to survive seven years after doing so." So in theory you could give away millions, and as long as you then live seven years, these "potentially exempt transfers" become "actually exempt".

So what's the point of the £3,000 annual exemption? It means that if you die tomorrow you'll still have saved your heirs some inheritance tax. If you haven't used your exemption in the previous tax year, this can be brought forward (a married couple in this situation could give away £12,000 without incurring a tax liability). Don't forget about 'regular gifts out of income' "possibly the most under-used device by high-income earning individuals", says Finance Daily. Provided the donor can show the gifts are habitual, made from post-tax income, and don't reduce their standard of living, they can give away as much as they like tax-free.

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