Wills & Probate
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Inheritance Tax
The basic ideas behind calculating Inheritance Tax (IHT) are quite straightforward (but beware - the details are slightly simplified here). However, as with any tax, the complications come when doing it for real.
- Add up the gross value of the estate (everything in sole name + your share of things in joint names + major gifts given away in the last 7 years + anything given away at any time but from which you still benefit + the value of certain types of trust)
- Take away any outstanding mortgage, debts (this can include the funeral costs, but not other estate administration expenses)
- Take away any exemptions (anything going to legal spouse, anything to UK-registered charity)
- Take away value of ‘relieved’ assets (e.g. qualifying family business, or a working farm)
For what is left, up to the IHT-free limit (the Nil Rate Band) is taxed at 0% but the excess is taxed at 40%. Currently the NRB is £325,000, so leaving £326,000 produces an IHT bill of £400. By careful planning even those with an apparent IHT problem may be able to reduce or even eliminate their family’s future tax bill. However, your Will writer will need to look at this carefully with you.
In October 2007 the IHT rules brought in the ‘Transferable NRB’, which might mean that married couples can leave everything to each other yet still exploit both NRB allowances when the family eventually inherit.
In past years the Nil Rate Band limit tended to be increased from 6th April. However, the Budget of March 2010 announced a freezing of the limit at £325,000 and the Coalition Government is sticking with that, with the Conservative’s original aim of a £1-million limit being dropped for now.
Inheritance Tax
Inheritance Tax (IHT) is payable at 40% - so no wonder many people need inheritance tax advice.
Currently the IHT free limit (Nil Rate Band) is £325,000.
Charities & Inheritance Tax
New rules from April 2012 will give extra IHT relief for those giving at least 10% to charity. read more