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People Who Are Exempt from Paying Inheritance Tax

By: Mike Watson - Updated: 5 Sep 2010 | comments*Discuss
Exempt Persons Inheritance Taxdeath On

You may wish to give things away to people in your lifetime or as part of your will which will be exempt from inheritance tax due to who that person is – i.e. because it is a person that you feel close to. You may alternatively wish to avoid paying inheritance tax so far as possible for whatever reason and thus may wish to give to persons who are naturally exempt from any liability

Who is Exempt as a Beneficiary?

There are in reality few persons who are exempt from inheritance tax and most exemptions are concordant with circumstances and not with particular persons who are related to you. The main two exceptions here relate to marriage sand partnership. A married or civil partner will benefit from your inheritance tax free should you not state otherwise in your will. Both you and your partner must have a permanent home in the U.K. at the time of your death and must still be married or engaged in a Civil Partnership.

You may also exempt wedding gifts up to a certain value from Inheritance Tax in your own life time, regardless of whther the beneficiary is a family member or not (see related article ‘Inheritance Tax and Marriage’ for more information on both of these last points).

Otherwise, the only way to exempt gifts may be to donate to benefit a person may be to donate to a Charity that may benefit them indirectly.

People Exempt From Paying Inheritance Tax

There are few people exempt from paying inheritance tax outright. Those who are married can avoid paying it by passing it all to their spouse. However, they will inevitably pay Inheritance Tax when they die, although technically, of course you may avoid a considerable share of your money being taxed by combining your nil tax thresholds under new inheritance tax laws regarding marriage and Civil Partnership (see related articles). Curiously this is a policy that penalises those who are not married and could meet with criticism for that reason.

The only truly clear cut exemption from Inheritance Tax is the ‘Death on Active Service Provision’ which states that any active member of her Majesty’s Services or any former Member of Her Majesty’s Service that dies as a result of wounds inflicted or diseases caught whilst on service will be exempt from all Inheritance Tax. Significantly this could apply to people who die as a result of wounds suffered decades ago as it covers death linked to the initial injury, even if the former service man or woman died in their old age. Many people are ignorant of this clause and fail to take advantage of a law that could save them tens of thousands of pounds. Of course, with the knock on effects that one injury could induce, in terms of further injuries and diseases there may be a great many people that could potentially have been exempt from Inheritance Tax without even knowing it. If you hav4e suffered an injury of any kind on active service whther you are an soldier, nurse, doctor, or driver (and so on) it is essential that you keep a note of your medical history and the progression of that injury throughout your life if you wish to potentially use this loophole.

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