The rules around Inheritance Tax can be hard to understand. Inheritance Tax can cost your loved one’s thousands.
How much tax is due depends on the value of the deceased’s estate which includes all of their assets including cash, investments, property, business, vehicles minus any debts.
The current Inheritance Tax threshold is £325,000. This means that subject to certain exemptions, anything over £325,000 will be taxed at 40% unless you leave everything to your spouse or civil partner.
There are many ways to legally mitigate or even in some cases eliminate Inheritance Tax if you plan ahead.
Property prices have rocketed in recent years meaning that more people than ever now have an Inheritance Tax liability. A Financial Adviser at Four Wealth Management can help you calculate how much your liability is and create a plan for you to reduce this as much as possible over time.
What are the Inheritance Tax rules if I’m married?
If you are married or in a civil partnership and choose to leave all of your assets to your spouse or civil partner then there is no Inheritance Tax liability.
Your partner also receives any of the unused Nil Rate Band that you didn’t use which means that they could gain your £325,000 allowance along with your £175,000 main residence allowance. This means that your partner
potentially can have £1,000,000 free from Inheritance Tax.
What is the residence nil rate band?
The family home usually makes up a large percentage of the value of an estate so because of this the Residence Nil Rate Band was introduced in 2017 and means that you will pay less Inheritance Tax if you are leaving your main residence to a direct descendant. In the 2021/22 tax year this allowance is £175,000 per person or £350,000 per couple.
Who pays an Inheritance Tax bill?
Inheritance Tax is not due until you die. The bill is usually paid from assets in the estate. If you do not have enough liquid assets, then your family usually have to sell assets to cover the bill as it must be paid within 6 months of death.
How can Inheritance Tax be reduced?
Inheritance Tax Planning is part of Estate Planning which involves creating a plan to determine how and when your assets will be passed onto your chosen beneficiaries.
Inheritance Tax Planning is about passing as much of an estate as possible onto your loved ones rather than to HMRC. Careful IHT planning will also allow you to maintain control over any arrangements so that you can change them if it is needed at a later date.
Plan for the future now
To calculate how much your Inheritance Tax liability could be and explore your options for mitigating this, you can book a no-obligation meeting with a financial adviser at Four Wealth Management.
Book online now or call 0117 973 0500.
The levels and bases of taxation, and reliefs from taxation, can change at any time and are dependent on individual circumstances.