Billions of pounds are collected every year from IHT alone, but efficient inheritance tax planning could help protect your family from losing a substantial amount of the estate that you leave behind to them.Guides
Inheritance tax (IHT) is a type of ‘death tax’ that’s applied to the estate of someone who has passed away, including their property, money, savings and any other assets. Payment of IHT is usually arranged by the executor of the deceased person’s will (if they had one), and how much they will have to pay depends on the value of the estate, but also how well the person had planned for the future.
There are ways to avoid inheritance tax, or at least reduce the amount your estate will be subject to. One way is to make a will, which requires careful planning regarding the inheritance of your estate.
The current inheritance tax threshold is £325,000, so your loved ones will be required to pay 40% tax on anything above that amount. Bear in mind that the thresholds are reviewed each tax year and can change.
Certain circumstances can change your threshold (otherwise known as the nil-rate band) - for example, it can increase to £475,000 if you decide to leave your home to your children or grandchildren.
If your estate is valued at anything below the threshold and you are married or in a civil partnership, the unused threshold can be added to your partner’s in the event of your death. This means that your partner’s IHT threshold could increase to as much as £950,000.
To calculate your inheritance tax bill, you need to start by valuing your estate. If the amount is over the threshold, your estate will be subject to inheritance tax at a rate of 40%.
Inheritance tax is only charged on the part of your estate that surpasses the threshold; anything below that amount will not be affected.
Assuming your tax-free threshold is £325,000, here are some examples:
You will not be required to pay any inheritance tax whatsoever if:
To plan for inheritance tax and avoid it when possible, it’s important that you write a will through a professional service like that provided by Unite Wills.
At Unite Wills, we offer a simple online will writing service, where members can create their will in three easy steps. By using this service and taking the professional advice of our trained advisors, you will be able to plan for inheritance tax and ensure that the majority of your estate remains untouched when possible.
Some of the best ways to plan for inheritance tax include the following:
Here at Unite Wills, our team can help you with inheritance tax planning and provide advice on all of the above.
Exemptions and reliefs can help reduce the impact of inheritance tax on the estate you leave to your loved ones when you pass away.
Firstly, it’s worth noting that assets left to your spouse or civil partner when you die are exempt from inheritance tax if you are living in the UK.
Another common way of avoiding the full 40% inheritance tax bill is by giving to charity. You could pay IHT at a reduced rate of 36% on certain assets if you leave 10% or more of the net value of your estate to charity in your will.
Certain lifetime gifts can also be exempt from inheritance tax, depending on when they were given. Other examples of possible exemptions or reliefs include agricultural properties, giving to political parties, and even gifts in consideration of marriage.
There are many loopholes and things to think about when planning how to distribute your assets when you pass away, which is why it’s so important to get help from us here at Unite Wills.
Start writing your will today or get in touch with us for more information on IHT rules by completing our short contact form. When you have done so, one of our trained professionals will be in touch at a time that’s convenient for you.