Inheritance tax pension rule could make six times more over 55s liable how investing in onshore bonds can help

Summary

Financial advisers have switched to recommending onshore bonds to help clients avoid inheritance tax and pass on wealth

Source: MoneyWeek

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Q1: What is the inheritance tax in the United Kingdom and when was it introduced?

A1: Inheritance tax in the United Kingdom is a transfer tax that was introduced on March 18, 1986. It replaced the earlier capital transfer tax.

Q2: How does the UK inheritance tax compare globally?

A2: The UK has the fourth highest inheritance tax rate in the world, according to the Tax Foundation. However, only a small proportion of the population is liable to pay it.

Q3: What is the role of financial advisers in helping clients avoid inheritance tax?

A3: Financial advisers often recommend strategies such as investing in onshore bonds to help clients legally minimize inheritance tax liabilities and facilitate wealth transfer.

Q4: How effective is investing in onshore bonds to mitigate inheritance tax liabilities?

A4: Investing in onshore bonds can be a strategic move to manage inheritance tax liabilities, as they offer tax deferment benefits, allowing wealth to be passed on more efficiently.

Q5: What are some scholarly perspectives on financial planning in relation to inheritance tax?

A5: Recent scholarly articles emphasize the importance of strategic financial planning, including the use of various tax-efficient investment vehicles, to effectively manage inheritance tax implications.

Q6: Why might onshore bonds be preferred over other investment vehicles for inheritance tax planning?

A6: Onshore bonds are favored due to their tax deferment capabilities, the ability to withdraw a percentage of the investment without immediate tax liability, and their overall flexibility in estate planning.

Q7: What percentage of deaths in the UK resulted in inheritance tax liabilities in the 2020-21 tax year?

A7: In the UK, 3.7% of deaths recorded in the 2020-21 tax year resulted in inheritance tax liabilities.

References:

Inheritance tax in the United Kingdom
Inheritance tax
Taxation in the United Kingdom