INHERITANCE TAX PLANNING
YOUR EVERYS EXPERTS
The current threshold at which inheritance tax (IHT) becomes payable on an estate is £325,000 for a single person. This is known as the nil-rate band. When a spouse or civil partner dies, their unused allowance can be transferred to their surviving partner. Provided they have not used up and exceeded their other allowances, a total of £650,000 may be passed on free of tax. IHT is then charged at a rate of 40% on the remaining estate.
As of April 2017, however, new rules were introduced which gave an additional allowance of £100,000 per person on the existing nil-rate band, making a single person’s allowance £425,000. This new ‘main residence’ nil-rate band allows an estate up to £850,000 (a couple’s £650,000 allowance plus their £100,000 each) to be passed on to direct descendants tax-free. By the 2020/21 tax year, the threshold will increase so that direct descendants may inherit estates worth £1,000,000 without having to pay IHT. For a single person, the maximum amount they may pass on without IHT being incurred is £500,000.
This new allowance is being introduced to help ordinary families who have seen their IHT liabilities increase due to the rise in property prices in recent years. The new allowance will not benefit everyone, however. Estates above £2 million, but less than £2.7 million, will have their nil-rate band reduced by £1 for every £2 above the £2 million mark. Estates worth more than £2.7 million will not be entitled to any nil-rate allowance.
These new rules are not straight-forward and advice should be sought to ensure that you take advantage of all the allowances available to you to prevent the taxman from taking what should rightfully be passed to your beneficiaries.
Contact one of our Private Client lawyers now to see how we can help you mitigate your liabilities through the use of various exemptions outside of the IHT threshold.
A guide to wills when buying a home
Why business owners can’t forget about inheritance tax
Will your executors know about all of your assets?
The importance of having a will – supermarket survey
Do your old style tax planning wills need updating in line with changes in the law?
Making a will as a new parent
Changes to inheritance tax for families
Request A Call Back