Inheritance Tax Advice

The value of everyone’s estate is taken into account when evaluating Inheritance Tax.

All UK domiciled persons have an individual allowance currently £325,000 before any Inheritance Tax is due this is also known as the Nil Rate Band Threshold (NRBT).

There is now also an additional residential Nil rate band allowance that may reduce your inheritance tax this currently stands at £125,000 per person and will increase in April 2019 to £150,000 and then finally to £175,000 in April 2020.

This can only be claimed if you own a property and are gifting this to children including adopted, step children and fostered children.

This can be a complex area and we can provide advice in relation to the use of Trusts and the residential Nil rate band.

What is not always understood is how the Tax works and how it applies to a person’s estate. There are many considerations to take into account when working out Inheritance Tax.

There are:

  • Exemptions
  • Business and Agricultural Relief
  • Potentially Exempt Transfers
  • Lifetime Transfers
  • Capital Gains Tax

 

Inheritance Tax Rate

The standard Inheritance Tax rate is 40%. It’s only charged on the part of your estate that’s above the threshold.

Example:

Your estate is worth £500,000 and your tax-free threshold is £325,000. The Inheritance Tax charged will be 40% of £175,000 (£500,000 minus £325,000).

 

Allowances between Married Couples / Civil Partners

There are allowances between married couples and civil partners to consider that are not available between partners who live together but are not married.

Also, the thresholds have not been increasing on an annual basis as they once were; therefore more and more people mainly through property ownership are falling into the Inheritance Tax bracket.

 

Who pays the tax to HMRC?

Funds from your estate are used to pay Inheritance Tax to HM Revenue and Customs (HMRC). This is done by the person dealing with the estate (called the ‘executor’, if there’s a will).

Your beneficiaries (the people who inherit your estate) do not normally pay tax on things they inherit. They may have related taxes to pay, for example if they get rental income from a house left to them in a will.

People you give gifts to might have to pay Inheritance Tax, but only if you give away more than £325,000 and die within 7 years.

 


We can assess and advise where appropriate and recommend steps to mitigate some or all of the Inheritance Tax liability. This advice is part of the Estate Planning process.

To discuss this with us, please contact us on 0800 689 0923 or email info@njlegalservices.co.uk

 

  • Why Choose Us?

We are qualified to give you the best advice and service, we also offer a free no-obligation discussion – at at time and place to suit you.

We focus on you, the individual, by listening and establishing what it is you would like to achieve and then providing you with the right solution.