Inheritance Tax Threshold
Inheritance tax is charged in the UK at the rate of 40% on the part of your estate that is over the inheritance tax threshold. Although the threshold is increased from time to time, due to the rise in property prices over the years, more people are caught in the inheritance tax net than ever before. Recent changes have meant that fewer people will be caught in the net. Seek professional advice regarding your estate, as there are some things you can do to mitigate the effect of the inheritance tax charge. At the moment the inheritance tax threshold in the UK is £325,000. That means that if your estate is less than £325,000, you do not need to worry about inheritance tax. For a couple, it is £650,000. The amount below the threshold of £325,000 is known as the nil rate band because the rate of tax on that amount is nil.
Residence Nil Rate Band
Recently, the Residence Nil Rate Band (RNRB) was introduced. This allows your beneficiaries to claim an additional inheritance tax free amount of £175,000 (for the tax year 2019–20) provided you owned your main residence and you left it in your will to your lineal descendants. It also applies if your estate is inherited by lineal descendants under the intestacy rules, or by operation of law. Currently, if your estate is over £2 million, it will not get the full £120,000, and in some cases, it may not even get any at all.
With the addition of the RNRB, it is now possible to get a total of £500,000 inheritance tax free threshold and £1 million for a couple, provided the estate is not worth more than £2million.
Charity Gifts Of 10% Of Your Estate
Another recent inheritance tax concession is that the estate can pay inheritance tax at a reduced rate of 36% instead of 40% if you leave 10% or more of the net value of your estate to charity. If you are considering taking advantage of this little-known concession you should see a professional so that you get the proportions right.
Inheritance Tax Report
If your estate is over the nil rate band and the residence nil rate allowance combined, then some inheritance tax planning is required if you wish to reduce the inheritance tax charge on your estate.
You need professional advice if you don’t want the value of your estate unnecessarily eroded by inheritance tax. Would you like to find out what the inheritance tax liability will be on your estate and what you can do about it now?
Use the button below to submit the details of your estate. Remi will review the information and confirm the fee to provide you with your personalised Inheritance Tax Report and Advice (from £550). You will also get a free e-copy of her Inheritance Tax Planning Guide.