Inheritance Tax (IHT) is a 40% tax, levied by the UK government, that is applied to your estate after you die. The allowance or ‘Nil Rate Band’ is £325,000 per person but there are a few other things to understand…
- There is no IHT to pay if your estate is below £325,000. However, its important to understand the full extent of your estate; what it comprises of and its total value……..you might well be surprised if you are harbouring the belief that your estate is under £325K!
- If you own a residential property this may allow you to claim the Residence Nil Rate Band (RNRB). The RNRB essentially increases your IHT allowance by a further £175,000, bringing your total allowance to £500,000.
- There is no IHT payable between spouses or civil partners, this means you can leave any amount of assets to your spouse without any IHT and without using your NRB or RNRB.
- If you are married or in a civil partnership, the allowances are transferrable, this can be complicate, though in short it could allow a married couple with children to leave £1,000,000 to their children without IHT being payable.
- Your estate can benefit from a reduced rate of IHT at 36%, on some assets, if you leave 10% or more of the net value of your estate – to a charity within your Will.
- You can ‘Gift’ up to £3000 in any year that isn’t liable to IHT provided you survive for 7 years after the ‘Gift’ was made.
It is essential that you enlist the expertise and help of an independent estate planning professional. Through effective estate planning, which takes into account the above points (1 to 5) as well as other aspects such as a Will, your pensions, your life insurance, business relief and trusts – the IHT liability on your estate can be greatly reduced whilst establishing a means with which to pay any remaining IHT.
Effective estate planning will give you complete peace of mind in respect of IHT and indeed any other issues, whilst ensuring that as much of your estate as possible goes to your family and other nominated beneficiaries