INHERITANCE TAX PLANNING
WHAT IS INHERITANCE TAX
All UK nationals are subject to inheritance tax on their belongings and their assets, wherever they may be in the world. Inheritance tax in the United Kingdom is a tax payable on the estate of a deceased individual. The amount of inheritance payable will depend on the value of the estate, which is a significant part of assets owned of the deceased.
This includes cash, jewelleries, cars, stocks and shares, homes & non-agricultural land, life Insurance policies not written into trust etc. and other financial assets which are subject to inheritance tax. Beyond the above assets, inheritance tax may also be due on gifts made during the lifetime of the deceased and upto 7 years and potentially up to 14 years prior to the death.
HOW MUCH IS THE AMOUNT OF INHERITANCE TAX
A number of thresholds make up the Inheritance Tax Allowance, under which no inheritance tax is due on the deceased’s estate. As of the current tax year 2018/19, each individual has a Nil-rate band allowance of £325,000. In 2018/19 tax year the main residence allowance is set at £125,000 and will gradually rise in future years, reaching £175,000 by 2020/21. It can be used when the main residence is passed to a direct descendant. Any unused Nil-rate band and main residence Nil-rate band can be passed on to the spouse, which means the inheritance tax threshold for couples in 2018/19 stands at a potential maximum of £900,000.
Inheritance Tax is charged at 40% on the value of the deceased estate over and above the total inheritance tax allowance.
OTHER INHERITANCE TAX ISSUES
Inheritance tax is typically paid out of the estate of the deceased. Liquid funds within the estate, such as cash in bank accounts, are typically used to cover the inheritance tax bill. Work must commence immediately after the death to figure out the estate’s gross value. For property or other assets that take time to sell, the option to pay inheritance tax in yearly instalments is there but this will be with an interest charge on these instalments.
The issues on which assets on which inheritance tax has to be paid, whether in full or instalments. How much inheritance tax can be paid on homes, shares and securities and unlisted shares and securities and business run for profit.
However there are a number of specialist asset classes that are exempt from inheritance tax. Besides business property relief may also act to reduce the value of a business or its assets for inheritance tax purposes, however certain types of company don’t qualify for business relief.
In short inheritance tax is a complicated area, especially when you start to attempt to reduce a potential inheritance tax liability with measures such as trusts and Life Insurance policies.
If the estate is sufficiently large, inheritance tax may be payable after the owner passes away. But there are ways estate’s tax bill can be cut and an increased amount be passed on to the legal heirs.
Following are some of the options for minimising the inheritance tax:
- Giving gifts
- Leaving money to charity
- Leaving your estate to a spouse
- Maximising your property allowance
- Considering equity release
- Taking out life insurance
- Using a deed of variation
Actual amount of inheritance tax will be payable on a number of factors. By structuring your estate tax-efficiently, HMRC’s claim on your estate could be minimised. This may reduce the need for the beneficiaries to sell their assets quickly in order to meet inheritance tax bills and reduce the amount of paperwork for them and avoid costly disputes with HMRC.
CONTACT US FOR A FREE INITIAL MEETING
To find out more about how we can help you, please contact us We offer all new clients a free initial meeting which will enable you to have a discussion about you and your business issues.
Our inheritance tax specialist can assess your exposure to inheritance tax after reviewing your finances and family circumstances. Our team of specialists will help you plan and reduce your inheritance tax at very reasonable cost. Use our expertise and of our partners to manage and minimise your inheritance tax incidence
OUR FEE AND CHARGES
Our fee and charges for managing and handling your inheritance and the inheritance tax vary on a case by case depending upon the intricacy of the case, however our charges are very reasonable.