Inheritance Tax - How will it affect you?

Most people do not realise how much that are worth

By the time you take into account the value of your home and any insurance policies, it is quite possible that your estate may be liable to inheritance tax. 

Although no tax is payable on an estate which is left to a husband or wife there can be scope for mitigating tax on the second death.  If your estate when aggregated with your husband or wife's estate (inclusive of any gifts made by you within the last seven years) exceeds the current inheritance tax threshold, meantime £263,000, you should consider inheritance tax planning

The current Bands and Rates for Inheritance Tax are:

  £0.00 to £263,000, (inclusive of chargeable transfers within the last 7 years)

0%

  £263,000

40%

The threshold of £263,000 was introduced on 6 April 2004 and the banding level changes regularly. The rate of tax i.e 40% has applied for many years but may also be subject to change.  

There’s no substitute for individual advice but you may find the following information of guidance

If your estate is likely to attract inheritance tax, you should consider transferring assets.  It is of course important that you retain sufficient resources for your own needs.

If you wish to reduce your Estate, you should consider taking advantage of Transfers which are Exempt

Transfers to a husband or wife whether made during life or on death do not attract inheritance tax provided your husband or wife is domiciled in the UK.  

The other main exemptions are:

 Annual Gifts per donor  

£3000

 Annual Gifts per donee

£ 250

 Gifts to Charities

EXEMPT

Gifts on Marriage

 By parent

£5000

 Grandparent

£2500

 Other  

£1000

In addition, most transfers made more than seven years prior to death, become exempt.

Such gifts known as potentially exempt transfers may themselves be subject to a tapering relief if their total value exceeds the inheritance threshold.

 Years before Death

0 - 3

3 - 4

4 - 5

5 - 6

6 - 7

 % of death charge

100%

80%

60%

40%

20%

The sooner you make such a transfer, the more chance you have of saving tax

Irrespective of the size of your Estate, you should consider whether or not it is possible to achieve Tax Savings by planning in a Will

For example, if you and your husband or wife each own estate to the value of £150,000  you might think no inheritance tax would be chargeable and indeed this would be the case on the first death. 

If, however, one of you dies leaving everything to each other although nothing is paid on the first death, on the death of the second person their estate would now amount to £300,000 and on second death tax would be payable on the sum of £37,000 at 40%, a sum of £14,800. 

This Tax could have been avoided by Planning in Advance 

Key- moves can help you decide what is best for you. Contact: info@key-moves.co.uk