Inheritance Tax (IHT) can have a substantial effect on the final value of your estate. As such, it is vital that you are aware of your IHT liability and when this will be payable. Here, our Wills & Estate Planning team offer specialist advice and guidance to ensure you are fully informed about IHT.
IHT is a tax that is paid when you die. It covers all property, money and assets that make up your estate at the time of your death. Your IHT bill is calculated after any debts you have are deducted, including funeral expenses.
There is a financial threshold below which you will not have to pay any IHT. This is called the Nil Rate Band (NRB) and is fixed at £325,000 until 2021. This means that if the total value of your estate is less than £325,000, you will not have to pay any IHT. However, you should remember that this encompasses your entire estate and not just your savings. Anything in your estate over the threshold is then taxed at a rate of 40 per cent.
If you leave everything above the NRB to your spouse or civil partner, you will not have to pay any IHT. Subsequently, if you are widowed or a surviving civil partner, you might have an increased NRB. This is because couples can transfer any unused NRB when they die to their surviving spouse or civil partner – potentially doubling the available NRB to £650,000.
An additional allowance called the Residence Nil Rate Band (RNRB) is available if you pass on your home, or a share of it, to your children or grandchildren. This includes adopted children, step-children and foster children. The RNRB is scheduled to increase over the next few years, with the threshold for the current and upcoming tax years set at:
If you have a Will, your executor will usually arrange for IHT to be paid. If there is no Will, the administrator of your estate is responsible for this. IHT can be paid from savings held at the time of your death, from funds within the estate or from money raised by selling assets that make up your estate.
IHT must be paid within six months of a person’s death. If this does not happen, HMRC will begin charging interest on the outstanding sum. Tax on assets such as property can be paid in instalments over ten years, however, it is important to note that interest will still be charged on any outstanding amount.
For information on Inheritance Tax Planning, call Miller Samuel Hill Brown today on 0141 221 1919 or fill in our online contact form.
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