When someone dies, it might be necessary for their estate to pay inheritance tax. Assessing whether or not tax is due can be very complicated, this article sets out the basic rules about when inheritance tax is due.
The inheritance tax threshold currently is £325,000 per person. If the total value of someone’s estate, combined with the total of the gifts that that person made in the seven years before they died is more than £325,000, it is likely that inheritance tax will be due, although there are exceptions to this.
The current inheritance tax rate is 40%, so in theory the balance of the estate above £325,000 will be subject to tax at 40%.
As of April this year, there is a new ‘Residence Nil Rate Band’, which gives additional inheritance tax relief if the deceased owned a property and it was inherited by their children or grandchildren. This extra relief is £100,000, but it will increase to £175,000 over the next four years. This means that by 2020, a married couple leaving everything to their children will have to have an estate worth more than £1 million before tax is payable.
Our Private Client specialists can advise you about how you can mitigate your inheritance tax liability through structuring your Will correctly, creating trusts, giving assets away during your lifetime and redirecting inheritance that you receive that you do not need.
For further advice, please contact Katie Ingham, Private Client Solicitor: