inheritance tax bills

What’s All This About Inheritance Tax?

havenifa

havenifa


Posted on: 11th March 2023

First off, we need to let you know that inheritance tax is not just a problem for the super-wealthy. There are many families hit by unwanted and unexpected inheritance tax bills because of a lack of awareness and proper planning.

When it comes to people’s inheritance tax position, independent financial advisers Cheshire feels that everyone should be provided with the information and options to help minimize and avoid exposure to this type of tax.

Inheritance Tax in a Nutshell

Inheritance tax mostly arises on death but can also be charged during your lifetime if you transfer assets into a trust. On death, inheritance tax is due if your taxable estate exceeds your available allowances and reliefs.

Your taxable estate consists of property and land you own, possessions such as your vehicles, jewellery and artwork, money in savings, investments and crypto-currency as well as business shares. If property or bank accounts are jointly owned with others, the legal ownership of the assets passes to the surviving owner, with half of the value included in the deceased’s estate for inheritance tax purposes.

Pensions, death-in-service benefits and life insurance written into trust are not included within the estate, with your taxable estate only reduced by mortgages, loans, credit cards, bills and funeral expenses. Exemptions and reliefs are then applied to your net estate value. If this falls below the threshold, there is no inheritance tax due. If it goes above, the excess suffers a 40% tax.

Current Allowance

Every individual has an inheritance tax allowance classed as the ‘Nil Rate Band’. This currently sits at £325k. The amount available on death depends on whether you have given away money above the exempt amounts or made a gift into a trust within seven years of your death.

UK-domiciled married couples can leave an unlimited amount to a spouse or civil partner, with no IHT due to the spouse exemption. Giving assets to a spouse or partner during your lifetime or death does not use up your nil rate band, but there are different rules if one spouse in a married couple is not UK-domiciled. Unused IHT allowances between married couples and civil partners are transferable.

A married couple can have a combined allowance of £650,000 plus the RNRB if applicable for a maximum of £1,000,000.

Are There Any Other Reliefs to Consider?

Business property relief and agricultural property relief are very common if you own a business or agricultural land. Your executors will need to establish whether your estate qualifies for these specific reliefs.

There are more obscure reliefs available for woodland and heritage properties which would require a special assessment.  For more help with inheritance tax bills, you need to talk with independent financial advisers Manchester. Contact the team at Haven IFA today.