Inheritance Tax is a charge that is paid to the government – HMRC – on the value of your estate when you die. There are some circumstances where some tax may also be due on gifts made during your lifetime. There is an amount that you are allowed to leave before the tax is assessed. This is known as the ‘Nil Rate Band’ and it is currently set at £325,000. From April 2017, there is an extra allowance if you own your own home and you are leaving to a direct descendant. This is currently £100,000 per person.
Who Is Responsible For Paying It?
Inheritance Tax is usually paid by the executor or personal representative and it is taken from funds from the deceased’s estate. It is important to note that the tax must be paid within six months of your death and before the grant of probate can be issued. Sometimes the executor has to borrow the money or pay it from their own funds.
Is There Any Way To Reduce This?
If you are married or in a registered civil partnership then you can leave any amount of money and/or assets to your partner with no tax being due at all. When they pass away, your “unused” allowance can be transferred to them, in effect doubling the amount up to £650,000 when you include the extra referred to above as of April 2017 this is £850,000. By the year 2020/21 this will have risen to £1 million.
Is It Just On The Value Of My Property?
Unfortunately not. Inheritance Tax is due on the total value of the estate that you leave. This includes property, savings, shares, ISA’s (only exempt from Income Tax), Pensions, Insurance lump sum payouts etc.
What Can I Do About It?
There are methods by which the potential tax bill can be reduced by arranging to have certain assets disregarded in the valuation process, this is a complex procedure and professional advice is essential. If you try and do this yourself it is very easy to get this wrong and make the situation worse rather than better.
Find out what you can do to reduce the amount of Inheritance Tax you have to pay, by simply completing the contact form below.