SPOTLIGHT ON: What is Inheritance Tax
What is Inheritance Tax?
Upon your passing, your ‘estate’ is assessed for inheritance tax. Your ‘estate’ comprises your financial assets (property, bank accounts, savings and investments etc.) minus any outstanding liabilities (including your funeral, outstanding bills and mortgage debt).
Each individual person has an inheritance tax allowance (known as the nil-rate band) of £325,000. This means that if your assets total less than £325,000 there is unlikely to be a charge of inheritance tax levied against your estate.
Further, if you own your home and intend to pass it to your children and/or grandchildren, you can also make an additional claim for the residence nil-rate band allowance of £175,000. This means that as an individual you could have a total allowance of £500,000.
If you are married, these allowances can become transferable meaning the tax position is even better. In certain circumstances, you can combine your own and your spouses’ allowances so that you can give up to £1,000,000 away, without paying inheritance tax.
Because of these advantageous rules, the majority of people will not have to pay any inheritance tax. However, if your estate is over the specific threshold that applies to you, the value in excess of the threshold will be charged to inheritance tax at 40%.
It is important to seek the correct advice regarding inheritance tax and ensure that your Wills are drafted as favourably as possible. Our expert Solicitors within the Private Client team can provide advice regarding everything outlined above, and tailor their suggestions to your personal circumstances. Please do get in touch for further information on 01530 510 666.
