Inheritance Tax

Something most of us probably do not plan for and have limited knowledge on, Inheritance Tax is a tax on the estate (property, money and possessions) of someone who has died.

The standard tax rate is 40%, which is charged on the value of the estate above £325,000 threshold, otherwise known as the nil rate band.

If you fall below £325,000 and therefore no tax to pay, you are still required to report this to HMRC using the IHT400 form.

Reduce your inheritance tax liability

1. Leaving your estate to your spouse, civil partner or a charity – no tax due.
2. Giving away your home to your children or grandchildren – threshold increases to £500k.
3. Give to charity – no tax due.
4. Set up and move everything into a trust – a little more complex.

Other points to consider

If you are married and your estate is worth less than the threshold of £325,000 then the remainder can be added to your partners threshold. This can potentially result in as much £1,000,000 threshold!

You can start to plan ahead from now and make gifts to family or friends who will not have to pay any tax as long as they are gifted more than 7 years before they are deceased.

Interesting Fact

People in certain ‘risky’ roles are exempt from paying inheritance tax if they die in active service. Included in this are armed forces personnel, police, firefighters and paramedics, plus humanitarian aid workers.

If this is something you are thinking about and would like to speak to a professional, get in touch with us at MTD to see how we can help and support you!