Protecting assets for future generations is a key consideration for many people when making their wills but with so many different thresholds and allowances it can be hard to know if your estate would be liable to pay Inheritance Tax upon your death so here is a helpful guide to the key rules.
Understanding Inheritance Tax
Inheritance Tax (IHT) is chargeable at 40% but is only charged on the part of your estate that is above the threshold. The headline figure is that you usually have no Inheritance Tax liability at all if the value of your estate would be less than £325,000. If more than £325,000, your estate would be liable to a 40% tax on any money or assets above £325,000; however,r this is not the whole picture. The following additional rules can help to mitigate, or in some cases eliminate, IHT liability.
- Any part of your estate left to your spouse or civil partner is Inheritance Tax Free.
- If you are married or in a civil partnership you can transfer any unused threshold to your partner on the second death meaning your combined estates could have a threshold of £650,000
- In addition, if your estate is less than £2million, and you pass your home to your direct descendants (including adopted and step-children) you can each have an additional £175,000 in allowance.
- Your estate can be charged IHT on some assets at a reduced rate of 36% if you leave 10% of more of your net assets to charity in your will.
Who Pays Inheritance Tax? Estate vs. Beneficiary Responsibilities
In general, should your estate be liable for IHT, it is not your beneficiaries that have to pay but your estate itself as part of the administration of the estate. However, your beneficiaries may be liable to pay IHT if they have received gifts from you within 7 years of your death if you give away more than £325,000 (of £650,00 if you have a transferable allowance from your late spouse or civil partner) in those seven years so it is important to keep a record of any gifts you give away.
Speak to Our Experts Solicitors for Personalised Inheritance Tax Advice
The above is not an exhaustive list and there are many different conditions and considerations that need to be taken into account which is why Inheritance Tax, and concerns surrounding it, can be a minefield and many people can be concerned unnecessarily.
Here at Fiona Bruce LLP the skilled team of Solicitors in our substantial Wills, Trusts and Probate Department (pictured), many of whom hold additional STEP qualifications, can advise on drawing up your wills and helping to administer estates. Call Rebecca Hall on 01925 263273 for more information.
The contents of this post do not constitute legal advice and are provided for general information purposes only ■
