Inheritance Tax Planning
When you die, the Government assesses how much your estate is worth. Your estate includes all your assets, such as your house and any other property, money in the bank, savings and investments, all your personal belongings, and any business you may own. Any debts you owe are deducted from the value. At present, no Inheritance Tax is payable if the balance is worth up to £325,000 (this is often called the “Nil rate band” as, technically, inheritance is charged at 0%), but Inheritance Tax is charged at 40% on values above that figure.
There are a number of exemptions from Inheritance Tax. The most common of these is the “Spouse Exemption,” which allows assets left to your spouse or civil partner, provided they are UK-domiciled, to be free from inheritance tax. If, on the first death, everything passed to the surviving spouse or civil partner free of inheritance tax, then their nil rate band can be transferred to the surviving spouse to be used on the second death. This means that, effectively, married couples or civil partners can pass up to £650,000 free of inheritance tax.
Another common exemption is called a “Potentially Exempt Transfer,” which enables any significant gift you make to not be included in your estate when calculating the inheritance liability, if you survive seven years after making the gift.
We can discuss these exemptions and a number of others that may be relevant to you when we meet.
Wills & Probate – Introduction
Information about Making a Will
Information about Probate and the Administration of Estates
Information about Mental Incapacity and Powers of Attorney