Inheritance Tax Planning

Inheritance Tax is a tax that is levied by the government when wealth is gifted either during your lifetime or on your death.

The current Inheritance Tax threshold is £325,000, and this allowance is known as the Nil Rate Band. If the total value of your financial assets is more than the Nil Rate Band, it is possible that Inheritance Tax may be payable on the value of your assets over this amount. The rate of Inheritance Tax upon death is currently 40%. In April 2017 an additional Inheritance Tax allowance became available. If a person is passing on a home in which they have lived during their lifetime to direct descendants, and additional £175,000 is added to the Nil Rate Band. This is commonly known as the Residence Nil Rate Band. It can be quite
complicated to claim and legal assistance is recommended.

 

Inheritance Tax payable on death is based on the value of your estate when you die. This will include:

• Everything you own at the date of your death e.g. your property, bank accounts, investments, personal belongings such as cars, jewellery, expensive electrical goods and antiques
• Your share of anything owned jointly with your spouse or any other person
• The value of any trust fund from which you are entitled to benefit e.g. receiving an income
• The value of any gifts made by you in the last seven years before you die and which are not covered by any exemptions
• The value of any assets which you have given away but still get a benefit from e.g. if you give away a house and still live there

People are considered to be a ‘long-term UK resident’ in the UK if they have been resident in the UK for at least 10 out of the last 20 tax years immediately preceding the tax year of their
death. People who are not a ‘long-term UK resident’ are liable to Inheritance Tax on the value of their UK assets only.

Charities and a spouse are exempt from paying Inheritance Tax - (although you should bear in mind that anything you leave to your spouse will increase the value of their estate and may result in a tax liability on their death depending on the value of the estate). Some assets also attract relief from Inheritance Tax e.g. agricultural and business assets.

For a consultation with a specialist Wills, Probate, Tax or Trusts Lawyer please call Holdens on 01524 32484 or contact us online.