inheritance-tax-planning
Inheritance Tax Planning
How Inhertiance Tax works
Inheritance Tax is payable on everything you have of value when you die. This includes your home, jewellery, savings and investments, works of art, cars, and any other properties or land, which includes any that are overseas.
What you need to know
Current Inheritance Tax rates and thresholds
- The nil rate band (which is often abbreviated to NRB, is the basic tax-free threshold) is £325,000 per person.
- The main residence nil rate band (or RNRB – which refers to your family home) is £175,000 per person.
- If you own your home (or a share in it) your tax-free threshold can increase to £500,000 (which is the NRB and the RNRB added together) if you leave it to your children (including adopted, foster or stepchildren) or grandchildren and your estate is worth less than £2 million.
- Gifts or bequests to charities and community sports clubs are usually exempt from IHT.
Small gifts not subject to Inheritance Tax liability
HM Revenue & Customs (HMRC) permits you to make a number of small gifts each year without creating an Inheritance Tax liability.
Each person has their own allowance, so the amount can be doubled if each spouse or registered civil partner uses their allowances. Anyone can give £3,000 in assets or cash each year without any IHT being liable
You can also make larger gifts known as Potentially Exempt Transfers (PETs) and you could have to pay Inheritance Tax on their value if you die within seven years of making them.
Who pays Inheritance Tax?
It’s usually the executor of the will (if there is one) who arranges to pay any Inheritance Tax. They’ll do this either from cash within the estate, or from money raised from the sale of any the estate’s assets.
The beneficiaries (those who inherit the estate) do not normally pay tax on things they inherit. However, they may have related taxes to pay if, for example, they get rental income from a house left to them in a will.
If you’re at all unsure, you should seek help from a professional.
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