Spending your money in retirement

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You've worked all your life to build up your wealth, so why not spend it enjoying your retirement - particularly if you have no family to leave your assets to? And even if you do, you may not want to leave them a large amount of money, much of which could be claimed by HM Revenue & Customs in the form of inheritance tax (IHT)

If you want to manage your money to ensure that you minimise your IHT liability, some of the solutions that are available include:

  • Gifting
  • Investing in assets which attract relief from IHT
  • Trusts

Before making any gifts, remember that people are living longer these days. You can't be sure how much money you'll need in future, or whether you'll have to pay for long-term care, so make some provision for this before you start gifting.

If you do have heirs and want to minimise the effects of IHT, the first thing to realise is that almost everyone can leave up to £325,000 without incurring IHT. Everything above this "nil rate band" will be taxed at a rate of 40%.

The good news is that most people can leave as much as they like to their spouses without them having to pay any IHT. When the first spouse in a married couple dies, any unused portion of the £325,000 allowance can be transferred to their partner. Then, when the second spouse dies, they can leave up to £650,000 without incurring an IHT charge. Remember that you can only transfer the unused nil rate band if you are married or in a civil partnership. This is why some long-term couples choose to marry late in life.

Gifting is one way to reduce your heirs' IHT burden. You can give up to £3,000 every year without incurring IHT, and if you didn't do this in the previous year, you can carry over the allowance.

You can also give as much as you like in the form of regular payments out of your surplus income. So for example, you could make a monthly contribution to your son or daughter's mortgage. Small gifts to friends and family are also exempt, provided that you don't give more than £250 to any one person in a tax year.

Finally, you can give an unlimited amount to another person while you're alive, without attracting IHT. However, you must live for at least another seven years, or the amount gifted will still be treated as part of your estate for IHT purposes.

It's also worth noting that no IHT is charged on most businesses.

Family trusts are also useful. They allow you to set aside money for your loved ones while retaining some control over it. There are several different types of trust available and care is needed to select the right one.

Check if you qualify for advice

If you have £50,000 or more in savings and investments, you may be eligible for HSBC Premier Financial Advice. See the full eligibility criteria.

If you don't qualify for HSBC Premier Financial Advice or if you'd rather not pay for advice, see other ways we can help.

The value of tax benefits will depend on your individual circumstances and tax rules may change in the future.

Need financial advice?

We can help give you expert advice for your individual circumstances.

See how we can help

Need to talk to us?

To discuss options or book an appointment:

0800 032 4710

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Everyone's circumstances are different and what applies to one person may not be right for someone else. The suggestions above are based on a general assumption of each circumstance and they are not intended to provide advice or recommendation.